UNITED STATES DIST RICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

UNITED STATES OF A MERICA, Plai ntif f, STATE OF NEW YORK, STATE OF NEW JERSE Y, STA TE OF C ONNEC TICUT, HOOSIER ENVI RONMENTAL C OUNCIL, and OHIO ENVIR ONMENTAL COU NCIL, Plaintiff-Intervenors,

vs. CINERGY CORP., PSI EN ERGY, INC ., and THE CINCIN NATI GAS & ELECTRI C COMPANY, Defendants. ) ) ) ) ) ) ) ) ) ) 1:99-cv-1693-LJM-JMS ) ) ) ) )

MEMORA NDUM OPIN ION & ORD ER On Sep tember 28 , 2007, this C ourt granted partial summar y judgment in favor of plai ntif f, the United States of America (the “Government”), and certain plaintiff-intervenors, the Hoosier Environmenta l Coun cil a nd the O hio Env ironme ntal C ouncil , on the ir cl aims thatdefendants, Cine rg y Corp., PSI Energy, Inc., and the Cincinnati Gas & Electric Company (collecti vely, “Cinerg y”), v iolated the terms of a 1998 Admi nistrative Order and the provisi ons of an Ohio State I mplementation Plan (“SIP”) tha t established limits on particulatematter (“PM ”) emissi ons at Cinerg y’s plant in Beckjor d, Ohio. Docket No. 984. On May 5, thr ough May 22, 2008, this C ourt presided over a Jur y Trial i n this matter with respect to theGovernment’ s, and plainti ff-intervenors ’, the States of N ew York, New Jersey and Connecticut , and the Hoosie r Envir onmental Council an d the Ohio Environmental Counc il (a ll pl ainti ffs, col lecti vely , “Pl ainti ffs”), claim s that Cine rgy violated Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 1 of 582 the New Source Rev iew (“ NSR”) pr ovisionsof the Clean Air Act (“CAA ”) when it performed certain work on its co al-f ired boile r unit s at se ve r al of its facilities in Indiana an d Ohio without first ob taining a perm it. On May 22, 2008, the Jur y returned a verdic t in favor of Plai ntif fs on the follow ing projec ts: (1) the f ront w all radiant superheater r eplacement project at W abash River, Indiana, unit 2 from June 1989 to July 1989; (2) the hig h temperature f inishing superheater tubes and upper reheater tubing asse mblies replacement project at Wabash River , Indiana, unit 2 from May 1992 to September 1992; (3) the finishing, intermediate , and radiant su per heater tubes and uppe r reheat tube bundles replacement pr oject at Wabash River, Indiana, unit 3 fro m June 1989 to Octobe r 1989; and ( 4) th e boi ler pa ss an d hea t reco very actions r eplacement project at W abash River, Indiana, unit 5 fro m February 1990 to May 1990. Docket N os. 1338 & 1339. On February 2, through F ebruary 6, 2009, this Cour t presided over a Bench Trial

on the appropriate remedy for the violatio ns found by the Court as a matt er of law at Beckjord, and by the Jury after a trial on the merits at W abash River. Docket Nos. 1581- 85. This Memorandum Opi nion & Order is intended to s erve as theCourt’s findi ngs of fact and conclusions of law after said Bench Trial as conte mplated by Ru le 52(a) of the F ederal Rules of Civil Procedure. A ny factual statement or finding mor e appropriatel y consider ed a conclusion of law shall be so deemed, and v ice vers a.

Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 2 of 583 I. FACTUAL BACKGROUND A. WA BASH RIVER PLANT Cinergy’s Wabash River plant is located in Vi go County , Indiana, near the C ity of Terre Haute. (Do cket No. 1499, at No. 8.) The Wabash River plant has fiv e coal-fired boiler generating units: Wabash River u nits 2, 3, and 4, are 90 megawatt ( “MW”) gross units that went onl ine in 1953, 1954, and 1955, respectively; unit 5 is a 103 MW gross unit thatw e n to n l i n e i n 1 9 6 8 ; a n d u n i t6 i s a 3 4 2 M W g ross unit that went onl ine in 1968. (Remedy Tr. at 2-330 to 331; Docket No . 1499 , at Nos. 11, 1 3, 14 , 16, 17, 1 9; Pl s.’ Ex. 1955, a tP S I

- 0 0 8 3 2 1 0

. ) A l l o f t h e Wa bash River u nits vent their emissi ons through a

common smokesta ck. (Re med y Tr. a t 1-3 1, 2- 330 to 33 1; Pl s.’ Ex. 2133 ; Sec rest , Nov. 13, 2008, Dep., at 49- 64.) Together , W aba sh un its 2 t hrou gh 6 bu rn ap proxi mat ely 2 million tons of coal in a typi cal year. (Remedy Tr . at 22-331.) Cinergy tends to vi ew units 2 through 5, t he smaller uni ts, collect ively . ( Id. 4-659.) By the mid-1980s C inergy , through i ts predecessor in inte r est, Public S ervice of Indiana (“PSI”) , knew that the forced outage r ate of a un it increase s and avail ability decreases w ith age. (Pls.’ E x. 1955, at PS I 0083177.) Mor eover, Ci nergy k new that the forced outage rate t ypicall y begins rising quickly at about 30 yea rs of operation. ( Id. at PSI0083177, 0083212.) In the mid-1980s, C inergy began a prog ram to ev a luate whether it was more economic to “refurbish” the units at W abash River or to replace them with new units. ( Id. atPSI-008 3187. ) In or arou nd Febru ary 1985, during he arings before the Public Service Commis sion of Indiana, Jame s E. Benning (“Benning”), then Executive Director–Fossi l

Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 3 of 584 Power Operations Supp ort at PSI, testified that the company’s “refurbishment plan”, also referred to as a “renovation plan”or a “plant life extensi on plan,” had the “ultimate goal

. . . to exte nd the life of exi sting ge nerating pl ants so asto de fer the n eed to bu ild ne w, costlygenerating units.” ( Id. at PSI-0083172.) Benning stated that the c ompany’s pro gram

was “designed to allow operation of its existin g generati ng plants at the same, or possibly

even greater, levels of reliability and efficiency through the year 2003.” ( Id. ) The W abash River projects at issue in this case were partof this refurbis hment plan. (Li ability Tr. at 2- 271 to 272, 2-300 to 302, 2-30 6, 2-315 to 317.) The com pany’s goal w ith respect to the W abash River units wasto extend thei r life fifteen year s beyond t heir curre nt l ife expectancy date of 1993. (Pls .’ Ex. 1319, at CINWA002121-22.) On May 22, 2008 , the Jury in this matter found that a reasonable power pl ant owner

or operat or woul d have exp ected a net incr ease of 40 tons or mor e in SO 2 and/or NO x emissionsas a proxi mate result of the r efurbishment projec ts at Wabash River units 2, 3, and 5. Docket N o. 1338. Specifically , the Jury found that Cinerg y viol ated the CAA when itfailed to obtain an NSR pe rmit for the follow ing projec ts: (1) the front wall radiant superheater replacement project at W abash River, Indiana, unit 2 from June 1989 to July 1 989, because of increas ed emissions of SO 2 ; (2) the hi gh temperature finishing superheater tubes and upper r eheater tubing asse mblies replacementproject at W abash River, Indiana, unit 2from May 1992 t o September 1992, becau se of increased emi ssions of

SO 2 ; (3) the fin ishing, i ntermediate, and r adiant superheater tubes and upper r eheat tube bundles replacement proj ect at Wabash River, Indi ana, unit 3 from June 1989 to October 1989, because of incr eased emissionsof both SO 2 and NO x ; and (4) the b o iler pass and heat recovery actions replacement project at W abash River, Indiana, unit 5 from

Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 4 of 585 February1990 to May 1990, because of incr ease emissions of both SO 2 and NO x . Docket Nos. 1335, 1338 & 1 339.

B. EMISSION S A T WA BASH RIVER During the first li ability phase trial i n May 2008, Plaintiff ’s expert, D r. Richar d Rosen (“Dr. Rosen”), pr esented the annual baselineemission lev els of SO 2 and/or NO xbefore the earliestproject was performed at each u nit (“Rosen base line”). ( Liability Tr. at 6-951 to 953; Pls.’ Ex . 1549.) Speci fically, for the 1989 project at W abash Ri ver unit 2, the SO 2 baseline emission lev el was 5,6 41 tons per year; for the 1989 pr oject at Wabash River unit 3, the SO 2 baseline emiss ion level was 4,484 tons per year ; and for t he 1990 project a t W abash River unit 5, the SO 2 baseline emiss ion level was 4,245 tons per year. (Pls.’ Ex. 1549.) With respect to NO x , theannu al b asel ine emis sio ns l eve l fo r the 1989 project at W abash River unit 3, was 1,201 tons per y ear, and the annual baseline emiss ions level for the 1990 project at Wabash River unit 5, was 1,156 tons per year. ( Liability Tr. at 6-952 to 953; Pls.’ Ex. 1549.) W abash River u nits 2, 3, and 5 , ar e st ill in s erv iceas o f the date of this Order. (Remedy Tr. at 2-309.) In January 2009, Cinerg y began running Wabash River uni ts 2, 3, and 5, at the annual Rosen baseline emi ssions levels des cribed above. ( Id. at 4-731 to 732.) Since the modifications were perfor med, Cinergy has emitted a pprox imately 378,000 tons of SO 2 from Wabash River units 2, 3, and 5, through the en d of 2007. ( Id. at2-208 to 209, 2-320; Pls .’ Ex. 2112B .) Since the modif ication s were perf ormed, Cinergy

Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 5 of 586 has emitted approx imately 49,00 0 tons of NO x from W abash Ri ver units 3 and 5, th rough the end of 2007. (Remedy Tr. at 2-308 to 309; Pls.’ Ex . 2112B.) For purposes of this Memorandum Opinion and Order, the term “excess emissions” means “actual emi ssions that would have excee ded levels of e miss ions that would have bee n all owed had permi ts been issued a t the time the modification took place, looking back.” (Remedy Tr . at 4-881.) Calculations for excess emissions w ere performed by party expertsfor varioustypes permi ts for whic h Cinergy might have applied and for various types of pollution cont rol sys tems that might have been installed if Ciner gy had appl ied for permits under NSR. The ty pe of pollution cont rol equipment that was r equired at the ti me of

the projects depended upon the designation ofthe area in which the Wabash River plant was located. ( Id . 2-307.) Atthe time of the projects, t he Wabash River plant w as located in a nonattainment

area with r espect to SO 2 emissions. ( Id. at 2-312.) Dr. Phyllis Fox (“Dr. Fox” ), Plaintiffs’ expert, testified that if Cinergy had applied f or a permit under NSR for each of the W abash River projects with respectto SO 2 , it woul d have been required to install lowest achievable emissionsrate (“LAER”) technolog y. ( Id. at 2-307.) Ther e is no dispute betw een the parties that LAER for SO 2 at the time of the pr ojects would have been a wet scrubber or wet flue gas desulfuriz ation (“FGD ”) unit. ( Id. at 2-307; id. at 3-588.) Ther e is a dispute , however, over the removal efficiency of the FGD’s available at the time of the projects. Dr. Fox opined that an FGD at the time coul d rem ove 95% of the SO 2 from the flue gas. ( Id. at 2-314.) D r. Fox came to her concl usion based on the installati on of an FGD

on a unit at a Pennsylvani a plant, know n as Mitchell unit 3, in 1982, pursuant to a consent

Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 6 of 587 decree. ( Id. at 2-318.) I n that case, Dr . Fox test ified that the consent decree required 9 5% removal efficiency and that the data f rom the installed unit showed that th e unit removed 99% of the SO 2 fro m the flue gas. ( Id. at 2-318 to 319.) In addition, t he vendor that constructed the Mitchell unit3 FGD applied for a patent on the process at a 99% r emoval efficiency rate. ( Id. at 2-319.) One other plant, Harry Alle n in Nevada, had been issued

a permit for an FGD wi th a 95% removal efficiency; but that plant had never been built. ( Id. ) Prior to 1999, Dr. Fox was als o aware of paper s being pre sente d in San Francisco and in other part s of the United States reporting on FGD efficienci es of 95% to 96% in the United States. ( Id. at 2-319 to 320.) Assuming C inergy had installed an FGD wi th a 95% removal rate, the excess emissi ons of SO 2 from Cinergy’s Wabash River units 2, 3, and 5, collectiv ely, was a total of 359,000 t ons, in the time period from t he date of the projects through 2007. ( Id. 2-230 to 231.) Cinergy’s expert, William DePriest (“D ePriest”) , testified that LAER at thetime of the projectswas an FG D that removed 90% of the SO 2 from the flue gas. ( Id. at 3-588.) DePriestopined that t he M itchell uni t 33 FGD was of a unique des ign, w hich woul d not have been the most economical choice for FGD s at the time. ( Id. at 3-589.) As sum in g Cinergy had installed an FGD w ith a 90% removal rate, the ex cess emissi ons of SO 2 from Cinergy’s Wabash River units2, 3, and 5, collec tively , was a total of 340,000 tons, i n the time period from thedate of the projects through 2007. ( Id. at 2-321 to 322.) Another Cinergyexpert, Thomas Rarick (“Rarick”), testified that i nstead of install ing LAERatthe time of the projects, Cinergy would have sought a sy nthetic minor permit cap

on SO 2 emis sion s at it s W aba sh Rive r plant. ( Id. at 2-322, 4-883, 4-897, 5-937.) The Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 7 of 588 syntheticminor permit cap would ha ve capped SO 2 emissions at the Wabash River plant atpre-project baseline levels. ( Id. at 4-883.)With such a permit, Ciner gy w ould have had to limit future production cap acity. ( Pearl Oct. 30, 2008, Rule 30( b)(6) Dep. at 51; Defs.’ Ex. DR142, at GAL-096179.) Cinergy has never obtained a syntheticminor permit for a coal-fired unit. (Pearl Oct. 30, 2008, Rule 30( b)(6) Dep. at 60.) In fact, C inergy representa tive S teven L. Pearl (“Pearl” ) testified that synth etic mino r perm its ar e mo re co ndu cive to combustion turbine units, which ar e “peaking units,” oper ating only at times of peak demand. ( Id. at 60-61.) Pearl testified that, t ypicall y, coal-fired units are “base-l oad units” that Cinergy would “w ant

. . . availab le to operateat all times , so [it is ] much more hesitant to restri ct their oper ation.” ( Id. at 61.) Pearl and Rarick agree that whether a synthetic minor permit would have been compatible with a ny of the projects at issue in this case would require an econom ic evaluatio n. ( Id

. at 60; Remedy Tr. at 5-935 to 936 .) Cinerg y never made such an evaluation. (Remedy Tr. at 5-936.) Hypot heti cally, ev en i f C inergy would have applied for and obtained a synthetic minor permit that w ould have capp ed SO 2 emissions at the Wabash River plant to th e Rosen baseline emiss ions level , Cinergy has emitted approximately 120,000 tons of excess SO 2 through December 2007. ( Id. at 2-323 to 324, 5 -939 to 941.) With respect to NO x , at the time of the proje cts, the Wabash River plant w as in an

area that was desi gnated attain ment for NO x . As a result of this status, Cinergy would have been required to install best available control tech nolo gy ( “BACT”) if i t had applied

Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 8 of 589 for and obtained an NS R permit. ( Id. at2-306 to 307, 2-311 to 31 2.) The parties dis agree over what would have been considered BACT at the time o f the W abash River projects. Plaintiffs’ expert, D r. Fox, testified that BACT for NO x in th e lat e 198 0s was sele ctive catalyticreduction ( “SCR”) technology . ( Id. at 2-325.) D r. Fox ex plained that SCR had not been installed on a coal-fired pow er plant in t he United St ates in the late 1980s, but the time was ri pe because SCR had been insta lled on such units overseas, particularly in Germ any, Austria, and Japan. ( Id. at 2-325 to 326.) Furthermore , SCR had w idespread use on gas- and oil-fired plants in the United States. ( Id. at 2-326.) The fir st SCR in t he United States for a coal -fired boiler w as permitted i n late 1990. ( Id. at 2-326 to 327.) Dr. Fox concluded thatany proble ms associated w ith high- sulfur coals us ed in the United States had been resolved in forei g n countries and would not impede application of SCR to coal-fired plants in the U nited States. ( Id. at 2-327 to 328.) Dr. Fox calculated the NO x excess emissions for t he Wabash River plant if SCR h ad been installed at the time of the proj ects to be 30,000tons through the y ear 2007. ( Id. at 2-328.) In contrast, Cinergy’s experts, Raric k and DeP riest, testified that BACT for NO x emissionscontr ol at t he timeof the W abash River projects on units 3 and 5 was a low-NO x burner with an emission l imitation of 0.6 pounds per mill ion BTUs. ( Id. at 4-889, 3-561 to 562.) Rarick testified that in his review of the RACT/BACT/LAER Clearinghouse, which is

a databa se of technology decisions t hat have been made un der NSR pro grams and i s managed by the EPA, and state and loca l environmental protection ag encies, BACT at the time of the Wabash River projects was not SC R. ( Id. at 4-885 to 886.) Rarick stated that Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 9 of 5810 the RACT/BACT/LAER Clearing house data supporte d a conclusion that low-NO x burners

were BACT at the time of the W abash River projects because there were numer ous entries thatidentified low-NO xburners as t he require d BACT for a number of coal -fired p rojec ts preceeding an d up to the date of the Wabash River modifications. ( Id. at 4-889.) In forming his c onclusion that SCR wasnot BACT at thetime of the W abash River projects, Rarick al so considered a statement made by the EPA in June 1991 i n public rul emaking do cuments regarding proposed rev isions to the PSD regul ations. ( Id. at 4-887.) At56 Federal Register 27638, the EPA stat ed that “[SCR] and SNCR are not in use in this countryas retrofit techno logies for coal-f ired boil ers and t he DOE, o r Departm ent ofEnergy sponsored projects, have not yet been demonst rated.” ( Id. at 4-887 to 888.) In addition, atthe same citation under a section entitled “Utility BACT Presumption for NO x ,” the EPA stated, “In general , this w ill call for the use of combustion modification and/ or low-NOX [sic] burners.”( Id. a t 4-890.) Although the E PA did not adopt thi s particula r rule-maki ng initiative, Rarick finds itpersuasive evidence of w hatthe EPA consi dered BACT at t he time it was w ritten. ( Id. at 4-888.) At t he time of the mo dification to unit 5, Cinergy installed a low-NO x burner t ha t would have met an emis sions limitation of 0.6 pounds per million BTU. ( Id. at 4-889.) Such a limitation would have been measured on a 30-day rolling average. ( Id. at 5-944.) Althou gh Cinergy did not install a low-NO x burner on unit 3 at the ti me it made the modification to that unit, it did install such a burner on unit 3 a few years l ater. ( Id. at 4- 889.) Even w ith these installations, Cinergy’s excess emissions of NO x would have totaled 4,865 tons, throug h 2009. ( Id. at 5-946 to 947.) Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 10 of 5811 Rarickopined that at the time of projects, installati on of BAC T for NO xemissions would have been the mos t reasonable pr esumption for how Cin ergy wou ld ha ve applied for a permit. ( Id. at 5-947 to 948.)

C. HA RM CA USED BY EXCESS EMISSIO N A T WA BASH RIVER 1. PM2.5 With respect to SO 2 emissions, D r. Fox testified that the an nual excess emissions of SO 2 is approx imately 23,00 0 tons. ( Id. at 2-321, 2-328.) Putting this into perspect ive, this rate is approximatelyequival ent to the amount of SO 2 emitted by 324 ,000 heavy-duty diesel trucks, w hich is the t otal number of truck s regis tere d in I ndia na, O hio, and K entu cky. ( Id. at 1-178 to 179.) According to Plaintiffs’ ex pert, Lyl e Chinkin ( “Chi nkin ”), the annual excess emis sions alone would rank among the top 5% of sources of SO 2 pollution i n the Eastern United States. ( Id. at 1-212.) Cinergy’s expert, Stanley Hayes (“Hayes”), testified thatthe annual excess emissi ons of SO 2 is equivalent to 2% of SO 2 emissions from all

sources of the gas in t he State of Indiana. ( Id. at 3-641.) An d, the Wabash River annual excess SO 2 emissions i s approxi mately tw o times that of the total annual SO 2 emissions from all point sources in all six co u nties of the Day ton Regional Air Pollut ion Control Agency. ( Compare id. at 2-242 with id. at 2-321.) There is no disputethat SO 2 and NO x emissions co ntribute to theformation in the atmosphere of secondary p articulate mat ter that is 2 .5 microns i n diameter or small er (“PM2.5”), which is c alled secondar y PM2.5. ( Id. at 1-6 2 to 6 4, 1- 118 , 1-1 21; P ls.’ E x. 1907, at CINERGY 1005860; Remedy Tr. at 2-234.) Sp ecifically , once emitted, SO 2 can Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 11 of 5812 form sulfates, which is a constituent of secondary P M2.5. (Remedy Tr. at 1-64, 1- 118, 1- 121.) Once emitted, NO x can form nitrates, which is another constitu ent of se con dary PM2.5. ( Id. ) In the air, PM 2.5 is measured in micrograms per cubic meter (“μg/m3” or “μg”). ( Id. at1-122 to 123.) Secondary P M2.5 represen ts the majorit y of PM2.5 in the United States. ( Id. at 1-64.) Secondary PM2. 5 can form over hundreds of miles, and it can travel thousands of miles downw ind from wher e it forms. ( Id. at1-77 to 78, 1-1 41.) Because of its size, PM2.5 is “consid ered res pirable .” Pls.’ Ex. 1 939, at CINERGY 1 3439 12. Once inhaled, PM2.5 lodge s deep in the human l ung. (Remedy Tr. at 1 -63.) Because the sulfate particles tend to combinewith metals in the atmosphere, thePM2.5 that contains sulfates are par ticularly toxic. ( Id. at 1-80.) According to Pl aint iff s’ expert, Dr. Joel Schwartz (“Dr. Schwartz”), the scientific

consensus is that PM2 .5 is harmful to human hea lth. ( Id. at 1-63 to 65.) Particulate matter, like PM2.5, cause the followi ng health impac ts: decreased lung function, increased p reval ence of respirator y symptoms , worsened respirator y infections , heart attacks , and the risk of earlydeath. ( Id. at 1- 49.) The effect on l ife expectancy and heart attack rates is both acute and chr onic. ( Id. at 1-65 to 7 0.) These vi ews are hel d by the follow ing groups in the scientific commun ity: the American Medical A ssociation; EPA’s Clean Air Science Advisor y Committee ( “CASAC”) ; the American A cademy of Pediatrics; the American College of Cardiolog y; the Ameri can Heart Ass ociation; the A merican Thoracic Soci ety; the American C ancer Society ; the Am erican Public Heal th Associati on; and the Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 12 of 5813 National Association of Local Boards of Hea lth (collect ively , the “relev ant public heal th advisory groups”) . ( Id. at 1-50 to 54.) According to the relevant public heal th advisor y groups there is cl ear and convi ncing scienti f icevidence th at significant adverse human-health effects occ ur in respons e to short-term and chronic pa rticulate matte r exposures at and below 15 μg/m3, the lev el of the current annual PM2.5 standard . ( Id. at 1-50 to 54; Pls.’ Ex . 1911.) Dr . Schwart z testified that the dose-r esponse curve for PM2.5 and mortality is linear, a t least in the range between 8 μg/m3 and 2 5 μg/m3, the range of amb ient PM2.5 in the United States. (Rem edy Tr. at 1-85 to 8 7.) Dr. Sc hwartz ’ statisti cal eviden ce was ack nowled ged b y a National Academy of Scien ces panel, w hich, after rev iewing epidemiology da ta, s tated “For pollutantssuch as . . . PM2.5 there is no evi denc e for any depart ure of lineari ty in the observed range of exposure.” ( Id. at 4-873 to 877.) There are some human cham ber studies and toxicology studies that argue against

a connection betw een PM2.5 and heal th effects. ( Id. at 1-60 to 62, 4- 809 to 811, 4-849 to 850.) And, the E PA has stated that it is relevant to consider s uch studies w hen evaluating potential mechanis ms for PM2.5-r elated effects. 71 Fed. Reg. at 61,15 1. However, the reports r elied upon by Cinergy’s expert , Peter V alberg (“Valberg”), to form his opinion that PM2. 5 doe s not have adverse heal th effects are a minority v iew and the bulkof the scientific literature on the subject concludes that PM2.5 has sig nificant effects on human health. ( Id. at 1-60 to 62, 1- 73 to 75.) Cinergy’s reliance on the February 1998 study by the EPA on Haz ard ous Air Pollutantsfrom E lectric Uti lity Steam Genera ting Units (the “HAP S report ”), is unava iling. Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 13 of 5814 ( See Defs.’ Ex. DR-244.)First, t he HAPS report only modeled the effects in a 50-kil ometer (“km”) radius from the Wabash River plant. ( Id. at ES-12, 14 to 15.) The primarysource of

harm from the excess emissions i n this case, P M2.5 generated downw ind of the W abash River plant, causeseffects beyond the 50- km radius of the r eport. Second, the HAPS report did no t address SO 2, NO x , PM2.5 , or ozone. ( Id. at ES-27.) The HAPS report recog nizes thi s deficiency as a signi ficant omission. ( Id. ) Cinergy’s reliance on t he Toxicology Excellence for Risk Assessment (“TERA”) report is equally unavailing. (Defs.’ Ex. DR-025.) Like the HAPS report, the TERA report does not address the health imp acts or risk f rom PM2.5. (R emedy Tr. at 4- 861 to 867.) The TERA re p ort does not atte mpt to measure the heal th impacts of emiss ions from W abash River that has mixed w ith pollutio n from other sources or, speci fically, t he health risks associated w ith PM2.5. ( Id. at4-863, 4-867; McElfresh, N ov. 14, 2008, D ep. at 120, 124.) Furthermore , t he effic acy of the TERA r eport is in question becau se there is n o evidence of the model used by the rep ort authors to form the conclusi ons contained therein. (McElfresh, Nov. 14, 2008, Dep. at 92-95, 1 15-16; Defs.’ E x. DR -025, at CINERGY 1547785-87; Remedy Tr. at 4-864 to 867.) In other w ords, there i s no way to test the v ali dity of th e ai r q uali ty m odel used to fo rm t he ba sisof the con clusions i n the report. (Remedy Tr. at 4- 864 to 867.) Plaintiffs’ expert, Lyle Chinkin (“Chinkin”), analyzed the extent to which excess SO 2 and NO xemissions from Wabash River units 2, 3, and 5, contributed to secondary PM2.5 formed in the air. ( Id. at 1-118.) To perform h is analysis, Chinkin prim arily re lied upon two different air qu ality model s, the Community Multi-Scale Air Qual ity Model (“CMAQ” ), and Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 14 of 5815 the Comprehensive Air Quali ty Model with Ex tensions (“CMAx ”). ( Id. at 1-125, 1-131, 1- 133.) CMAQ is a photochemical grid mode l that repres ents the atmospheri c science of air pollution in three dimens ions. ( Id. at 1-125.) The at mosphere is si mulated in a series of

“gri d cells, ” or boxes , over a community. ( Id. ) CMAQ provides an estimate of air pollution concentration in each of the grid cells for PM2. 5 and ozone. ( Id. at 1-126.) This model accounts for emissions, atmospheric chem istry, meteorology, and physics. ( Id. at 1-125 to 129.) CMAQ is one of the most peer-r eviewe d air qual ity models and reflects years of sc ienti fic testing, experiments , and comparisons of the model’s pred ictions to measured air pol lution by air quali ty monitors . ( Id. at 1-125 to 126, 1 -129 to 130.) The CMAQ modelin g used by Chinkin was derive d from “VIS TAS,” a regional planning organiz ation of Southeastern states that w as formed to addressair pollut ion problems. ( Id. a t 1- 133 to 134.) In i ts study, VISTAS modeled the year 2002, incl uding SO 2 and NO x emissions from mul tiple sources and the Wabash River plant, to determine both PM2.5 and ozone impacts. ( Id. at 1-133 to 135.) Peer-rev iewed paper s concluded that the VISTAS study was rel iable. ( Id. at 1-135 to 136.) Chinkin used a CMAQ mode l identical to the VISTAS model, how ever, heremoved the excess emi ssions of SO 2 and NO x from the W abash River plant, as provided to him by Dr. Fox, to determine the impact ofthe excess emis s ions on PM2.5 an d ozone concentrations. ( Id. at 1-130, 1-132to 133, 1-139 to 1 40.) Chinki n selected June 2002 to model because there were a number of days in that month when air quality exceeded the Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 15 of 5816 National Ambient Air Quality Standard (“NAAQS”) for PM2.5 and ozone. ( Id. at 1-138, 1- 181 to 182.) The CMAQ modeling indicated th at the excess emissions from t he Wabash River plant contributed to PM2.5 levels in Indiana, Oh io, Kentucky, Illinois, Ma ryland, R hode Island, New York, Connecti cut, and New Jersey. ( Id. at 1-141, 1-143 to 147.) Spec ific ally, the excess emis sions f rom Wabash River contri buted about 0.50 μg of PM2.5 to Indianapolis, Indiana, on half of thedays m odeled. ( Id. at 1-206 to 208. ) The avera ge monthly impact on PM2.5 rang ed from 0.17 to 0.10 μg in Indiana, w ith smaller impacts in states such as Illinois, Kent ucky, Ohio, Mich igan, and Wisconsin. ( Id. at 1-148 to 149.) Chinkin opined that t his mo n thly impact is repres entative of the l ikely annu al impact on PM2.5 concentration from the excessemissions asconfirmed by ot her modeling and analysis . ( Id. at 1-138, 1-171 to 173.) CAMx is another phot ochemical grid model that Chinkin used to form his opinions. ( Id. at 1-131.) CAMx is similar to CMAQ in th at both models provide esti mates of PM2.5 and ozone impacts based on emissions, atmospheric chemi stry, and meteorology . ( Id. at 1-132.) For other p urposes, the EPA recently used CAMx to estimate PM 2.5 impacts from t he emissions from t he Wabash River plant in the calendar y ear 2005. ( Id. at 1-150 t o 152.) The area, o r domain, modeled i ncluded Indiana, I llinois, Wisconsin, M ichigan, Kent ucky, and Ohio. ( Id. at 154.) Chi nkin opined that the EPA’s CAMx model is reliable and consistent w ith the EPA’s guidelineson good “model performan ce.” ( Id. at 1-154 to 155.) Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 16 of 5817 Althou gh the C AMx modelin g estimated the PM2.5 impact of the entire plant’s emissions, approximately one-third of that imp act is due to the excess emissio ns from W abash River units 2, 3, and 5, because excess SO 2 emissions represent approximately one-third of the total SO 2 emissions from t he plant and the relations hip between S O 2 and sulfate forma tion is fairlylinear. ( Id. at 1-152 to 153, 1 -177 to 178.)The parties’ experts agreed that this pr oportionality techniquewas reas onable. ( Id. ; id. at 3-631 to 632, 3 -633 to 634.) During the 2005 model year, the greatest dai ly impacts from the excess emissions

on PM2.5 occurred during the summer, when it is hot, humid, an d the air is stagnant; these

are conditions that are most conducive to convers ion of SO 2 to sulfates. ( Id. at 1-159 to 162.) For exampl e, on June 6, 2005, t he excess emi ssions had about a 0 .70 μg impact

on the Indianapolis area, wit h lesser impac ts extending to Louisvi lle, Kentucky; CincinnatiDayton, Ohio; and Lafayet te, Indiana. ( Id. at 1-159 to 161; Pls.’ Ex . 2139.) On August 26, 2005, the highest daily impact of excess emi ssions on PM 2.5 occurred. (Remedy Tr. at 1-161 to 162; Pls.’ Ex. 2139.) On that day, the Wabash River plant had a 6.40 μg impact , one third of whi ch was from excess emi ssions. ( Id. ) Nonattainment ar eas impacted that day includ ed Gary, In diana, and Chicago, Illi nois. ( Id. ) Using the CAMx modeling, the EPA compiled a list of PM2.5 nonattainment areas thatwere most impacted on days when PM2.5 concentr ations wer e predicted tobe high. (Remedy Tr. at 1-165 to 168.) Those area s incl ude d: Eva nsvill e, In dian a; Kn ox Cou nty, Indiana; Dubois Coun ty, Indiana; Louisev ille, Kentuck y; Mari on County, I ndiana; Chicag o, Illinois; Cincinnati , Ohio; Lafayette, Indiana ; Ken t, Mic higan ; McKr acke n Cou nty, K entu cky; Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 17 of 5818 Madison, Illinois; St. Louis, Missouri ; and Dayton, Ohio. ( Id. ) The averag e daily i mpact on those areas ranged from 0.65 μg to 0.1 9 μg, approximately one-third of which is attributable to excess emi ssions from Wabash River units 2, 3, and 5. ( Id. ) The average annual impacts on PM2.5 concentr ations from the excess emissions from Wabash River units 2, 3, and 5, was predicted by CAMx to be approximatel y 0.15 to 0.16 μg. ( Id. at1-171 to 172.) On an annual basis , the most impacted area was ne ar the W abash River plant and extending into Indianapol is, wi th smaller i mpacts over the states of Illinois, Wisconsin, M ichigan, O hio, and Kentucky . ( Id. ) The annual impacts p redicted by CMAQ and CAMxcorroborate one another because their predictions are rema rkablysimilar: annual impact of 0.17 μg predicte d by CMAQ compared to an annual impac t of 0.16 μg predicted by CAMx. ( Id. at 1-138, 1-150 to 152; 1-169 to 173. ) Chinkin also analyz ed data from a third analytical tool called “CALPUFF.” ( Id. at 1- 124 to 125.) CALPUFF is an air quality mode l that track s the movement of ai r pollution from a source, however , it uses simplified chemistry compa red to the CMAQ and CAMx models. ( Id. ) The CALPUFF data that Chink in considered was performed by the Indiana Department of Environmental Management (“ IDEM”), and modeled the emission from the W abash River plant for its impact on PM2.5 c oncentrations i n the year 2003. ( Id. at 1-174 to 175.) CALPUFF predicted impacts fro m the W abash Ri ver emiss ion s over al l of the Midwest , and into the st ates of New York, New Jersey, and Connecticut. ( Id. at 1-175.) The PM2.5 concentrations predicted by CALPUFF modeling were smalle r than the Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 18 of 5819 predictionsfrom the other two models; ho wever, Chinkin attributed thi s difference to the simplified chemi stry of the C ALPUFF model. ( Id. at 1-175 to 176.) Chinkin opined that the ex cess emissi ons from W abash River units 2, 3, and 5, had

a substantial or meaningfu l im pact o n the PM2.5 concentration in nonattainment area s. ( Id. at 1-118, 1-194 to 197.) The dail y NAAQS for PM2.5 is 1 5 μg, whi le the annual NAAQS is 35 μg. (62 Fed. Reg . 38,679 (July 18, 1997); 71 Fed . Reg. 61,144, 16,165, 61,171 (Oct. 17, 2006) ; 62 Fed. Reg . 38,856, 38,895 (July18, 1997); 73 Fed . Reg 16,435 (Mar. 27, 2008).) N o single s ource is cons idered a lone when determining whether th e PM2.5 concentration in any g iven area exceeds these standards . (Remedy Tr. at 1-197, 3-634 to 637.) When communities are w ithin just afew t enth s of a μg from compliance with the a nnu al an d/or daily N AAQS, contrib utions on the order of on e-tenth of a μg are significant. ( Id. at 1-150, 1-173, 2-225 to 226, 2- 237 to 239, 2-241.) Therefore, contributions of single sou rces can make a difference in areas where the di ffe rence between attainment and nonatta inment is very small

. ( Id. at 2-259.) Dayton, Ohio, is one such area. ( Id. at 2-225 to 226, 2 -238 to 239, 2-241 .) There are other such areas in the Eastern United States. ( Id. at 2-240 to 241.) Chinkin als o opined that continued emi ssions from the W abash River plant would have the same i mpacts in the future . ( Id. at 1-176.)

2. Ozone In addition to PM2.5, NO xcontributes to ground lev el ozone, an o ther secondary pollutant. ( Id. at 1-91, 1-121. ) In the pres ence of heat and sunli ght , N O x reacts w ith Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 19 of 5820 hydrocarbons—also referred to as volatileorganic compounds (“VOCs” )—to form ozone

. ( Id. ; Pls.’ Ex. 1907, at CINERGY 1005842.) In the air, ozone is meas ure in parts per billi on (“ppb”). (Remedy Tr. at 1-123.) According to Dr. Schwartz, ground-l evel oz one causes acute i nflammation of the lungs, reduction in lung function, incr eased r espir atory symp toms and changes i n day-today mortality rates ; it can tri gger asthmaattacks; and i t can increas e hospital admis sions for respirator y illnes ses. ( Id. at 1-54 to 55, 1- 91 to 92.) Similar to the effects of PM2.5, the scientific consensus is th athuman health eff ects from groun d-le vel ozo ne is linea r down to low l evels and th at any thres hold is below current ambien t levels . ( Id. at 1-92 to 93.) Atthe excess NO xemissions calculated by Dr. Fox if SCR was BACT at the time of the projects at Wabash River units 2, 3, and 5, the CMAQ model indicated thatthe excess emissionscontributed to ozone poll ution in Indiana polis, Indiana , and further downwind in Ohio. ( Id. at 1-147 to 148.)

3. Acid ic Depositi on or A cid Rain The third ty pe of harm associated w ith emissions of SO 2 and NO x is acidic dep osition or acid rai n. ( Id. at 1-64, 1-118, 1-121.) As previousl y discus sed, SO 2 is a precursor for sulfates and NO xis a precur sor for nitra tes; sulfate s i n the form of su lfuric acid and nitrates in the form of nitric aci d, are the major components of acid rain. ( Id. at 2-270 to 271.) Plai ntiffs’ expert, Dr. Charl es Drisco ll (“Dr . Driscol l”), testi fied to the general environmental effects of acid rain. ( Id. at 2-260 to 302.) Generally , those effects incl ude

r e stricted growth of fauna, decreased ability of fauna to fight dise ases and insect Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 20 of 5821 infestation, and similar detrimental eff ects on aquatic ecosystems . ( Id. at 2-275 to284.) Dr. Dri scoll opined that the general trajectorypattern of the Wabash River e missions, as described by the models used by Chinkin, i s very similar to the emissions pattern that other modeling and trajector y studies have reported in the scie ntific liter at ure aboutacidic deposition. ( Id. at 2-272 to 2 74.)Ther efo re, Dr. D riscoll opined that the effects of the

excess emissions from Wabash River units 2, 3, and 5, wou ld be consistent with t hose of previousl y-repor ted studies. ( Id. ) Dr. Dris coll stated that t he ove rwhe lmi ng consensus amon g the scient ific community is that acidic deposition has c umulative, l o ng-term effects on b oth forest and aquatic ecosystems. ( Id. at 2-276 to 277, 2 -281, 2-287.) Reductions i n acidic depos ition can reduce and reverse these adverse effects, however , recover y is very slow . ( Id. 2-277 to 278, 2 -285 to 28 6.) Dr. D riscoll opined that the g reater the ex tent of acidic depos ition reductions, and the sooner such reducti ons are achiev ed, the faster the re covery . ( Id. at 2-277 to 278, 2-28 7.) Plai ntif fs presented n o evi dence, however, from whi ch Dr. Driscoll purported to

ana lyze the extent towhi ch any measured acid depositi on was attributable to emis sions from W abash Rive r units 2, 3, and 5. ( Id. at 2-272, 2-300. ) Despite having per for me d environmental quality modeling in the past, Dr. Driscoll did not perform such model ing for the emissions fr om the Wabash River plant. ( Id. at 2-272, 2-29 9 to 300.) Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 21 of 5822 4. Mercury Effects Plaintiffs’ expert, Dr. Dri scoll, als o testified about th e general env ironmental effects of

mercury, which i s another bipr oduct of coal combust ion that is emitted from the W abash River plant. ( Id. at 2-288 to 298.) Even Ci nergy un derstands that power plants are the largest source of mercury emi ssions in th e United States . (Geers Oc t. 24, 2008, Dep. at 27, 35-38, 89-90.) Mercury is emitted in three forms from a coal-fired power plant like W abash River: elemental merc ury, gaseous oxidized mercury and particul ate oxidized mercury. (Remedy Tr. at 2-289 to 290.) Oxidized mercury is deposited generally close to the source, or within 250 miles of the sour ce. ( Id. at 2-289.) The mer cury emitted from the Wabash River plant largely are in the ox idized form. ( Id. at 2-290.) Mercury th at e nds up in the soi l undergoes a chemical tr ansformation call ed methylation. ( Id. at 2-291.) The formation of “methy l-mercury ” is heig htened by aci d rain, spec ific ally, sulfate dep o sition. ( Id. at 2-292.) M ethyl-mer cury bioa ccumulates in food chains and is the form of merc ury found in fish. ( Id. at 2-291 to292.) Most importantly , the concentration of methyl-merc ury goes up by a factor of one to ten million from the tim e it enters lakes and streams, moves through the food chain , and, finally, accumulates in larger fish consumed by people and animals. ( Id. at 2-294.) There is plenty of literature to support Dr . Driscol l’s op inion that methyl-mercury deposition has negative effects on the aquat ic ecosystem in Indiana and surrounding states. ( Id

. at 2-294 to 297; P ls.’ Ex . 1913.) Dr . Driscol l also opined that reduction o f Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 22 of 5823 mercuryemissions from Wabash River would li kely res ult in bene fits t o Indiana and surrounding areas wi thin a 250-mil e radius. ( Remedy Tr. at 2-290, 2-297 to 29 8.) W abash River units 2 through 6 emit a pproximatel y 170 pounds of merc ury per year; units 2, 3, and 5, emit approximately 58 pounds of m ercuryper year. ( Id. at 2-351; Pls.’ Ex. 2100, at CINREMETREX000917; Docket No. 1 499, Stip . of Fact No. 29.) Operation of FGDs and SCR s together can remove from 70% to 80% of the mercury that is otherwis e emitted from a coal-fired power plant . (Pls.’ Ex. 1912.) An FGD alone would remove from 40% to 60% of the mercury . (Remedy Tr . at 2-391.) Plai ntif fs did not do any modeling or other env ironmental ri sk assessment to determine w h e r e Wa bash River mercury emissions may have been tr ansported or to gauge any im pact thes e em issio ns ma y have had. ( Id. at1-183, 1-190, 2-300.) Moreover, the EPA’s HAP report did study mercury and concluded, generally, that mercury emissions from the utility industry are not expe cted to have a n y adve rse h ealt h effec ts. (D efs .’ Ex. DR-244; Remedy Tr. at 4-826 to 831.)

D. WAB ASH RI VE R C OM PL IAN CE TO DAY Compliance with NS R today w ould requir e ins tallatio n of BACT at Wabash River units 2, 3, and 5 . (Rem edy T r. at 2-329 to 330.) BACT w ould requir e a scrubber t hat removed 99% of theSO 2 and an SCR that would remove 90% of the NO xfrom the units’ emissions. ( Id. ) Cine rgy, however, through James L. Turner (“Turner”), Duke Energy Corporation’s Group Executive and President and Chief Operati ng Officer of Duke’s franchi sed electric Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 23 of 5824 and gas busines s segment, stated that it would not make sense to install pollution controls

on Wabash River units 2, 3, and 5, because th ey are too old for such modifications to be economical. ( Id. at 4-679.) M oreover, Turner testified tha tabse nt a finding of liability in this case , Cinergy did not plan to shut down Wabash River units 2, 3, and 5, in th e foreseeable future. ( Id. at 4-679 to 680.) However, as environmental restrictions are likely to become tighter over ti me, generall y, smaller , older units like Wabash River uni ts 2, 3, and 5, “are likely the ones that over time wi ll be shut down.” ( Id. at 2-680.) I n fact, in 2007, Cinergy opined that reti rement of Wabash River units 2, 3, 4, and 5, ar ound the year 201 2 is

an important scena rio to consi der given the high co st to re trofit these unit s with pollution control equipment, esp ecially if more stringent environmental regulations are to be enacted. The se are the next oldest coal units on Duke En ergy Indiana’s sy stem . . . and, w ith more stri ngent envi ronmental requirements , likely the next uni ts to face retir ement. (Pls.’ Ex . 1971, at CINE RGY 1407877-78

. See also Remedy Tr. at 4-720 to 722.) Cinergy presented ev idence that Mi dwest ISO ( “MISO”) has concerns ab out a n immediate shut down of Wabash River units 2, 3, and 5. (Remedy Tr. a t 5-957 to 992; Defs.’ Ex. DR- 321.) Specifically, a MISO representative, Roger Harszy (“Harszy” ), MISO Vice President of Real Time Operations, testified that M ISO i s respons ible for the transmission of power in fourteen states acros s the Midw est, and in theCanadian province of

Manitoba. (Remedy Tr. at 5-958.) Upon Plaintif fs’ request, M ISO undertook an analysis of

the p oten tial impa ct of th e immediate shutdow n of Wabash River units 2, 3, and 5 (“MISO report”). ( Id. at 5-960; Defs.’ Ex. DR- 321. ) Based on the analysis in the report , Harszy opined that the immediate unavailability of W abash River units 2, 3, and 5, would Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 24 of 581 For purposes of the MISO study and this Order , the summer peak of el ectricity demand is defined as day s of ninety-d egrees or higher in the Terre Haute a rea. (Remedy Tr. at 5-974 to 975.) 25 cause a significant problem in MISO’s service of the electrical demand in the Terr e Haute load pocket. ( Remedy Tr. at 5-962.) Harszy explained t hatwithout Wabash River units 2, 3, and 5, to generate power, MISO would use power g enerated in other parts of In diana , Illinois , and Michig an, to service the Terre Haute load pocket. ( Id. at 5-964.) Such a situation would put a strain on the Dresser t ransmission substation during the summer peak of electric ity demand. 1 ( Id. at5-964 to 965.) Transmission of power through the D resser subs tation is li mited by the transformer equipment at tha tlocation. ( Id. at 5-966.) Without Wabash River units 2, 3, and 5, in operation, coupled with the loss ofone of the transf ormers at Dresse r, the Dresser substation coul d overload and MISO w ould have to s hed load to the Terr e Haute region to allevi ate the situati on. ( Id. at 5-967 to 968, 5 -975 t o 976.) If MISO instructs a power supplier to “shed load” i t asks thepower supplier to turn off the supply of electrici ty to a certain nu mber of customers. ( Id. at 5-968.) Harszy testified that the MISO repo rtre commends two thi ngs to all eviate its

concerns about the limitation on th e Dresser s ubstation: (1) add another transformer to the Dresser substation; and (2) add ano ther 138,000-volt transmissi on line from Dr esser t o the Allendale, and Margar et substations. ( Id. at 5-969 to 970.) Cinergy believes th e addition of a noth er tra nsf orme r at Dr esse r would allevi ate MISO ’s con cern s com plet ely. ( Id. at 4-690 to 691; G esweing Nov. 5, 2008, Rule 30(b)(6) Dep. at 108-09.) The addition of

another transformer at Dress er has already been planned for by Ciner gy and acc ounted Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 25 of 582 An “Attachment Y study” i s a detailed eng ineering an alysis of different transmission and capacity scenarios t hat MISO would perform if a pow er plant ow ner told MISO that the power plant owner intended to shut down a gener ating unit. (Remedy Tr. at 5-970, 5-971.) The MISO repor t is not an Attachment Y study . ( Id. at 5- 960, 5-970, 5-973. ) 26 for in models used a t MISO, but not in the immediate futur e. (Remedy Tr. at 5-997, 4- 778 to 779.) Turner testified that on or about January 30, 2009, he authorized his personnel to

move forward w ith the acquisi tion of a transformer for Dresser , which Turner targeted for installati on in June 2012. ( Id. ) Cinergy stated that it would take approximately two years to obtain a transformer of the appropri ate size for Dresser. (Geswein Nov. 5, 2008, Rule 30(b)(6)Dep. at 109.) In addi tion , Cine rgy gene rally k eep s a sp are t rans for mer o f th e size needed at Dresser in the sy stem. ( Id. ) Turner test ified that Cinerg y has already pl anned to use itsonly spare transformer to replace a more criti cal failure i n the Cincinna ti, Ohio,

area. (Remedy Tr. at 4-692 to 694, 4 -767 to 678, 4-772 .) Turner also test ified t hat Cine rgy could have a the new transmissi on line in pla ce by September 2012. ( Id. at 4-695 to 696.) Harszy stated that if MISO knew for certain th at W abash River units 2 , 3, and 5,

were going to go offl ine; or if ther e wer e some catastrophe that would take Wabash River units 2, 3, and 5, offline; or if Ciner gy had appr oached MISO and as ked it to study such a scenario, MISO wo uld h ave pe rfo rmed an At tach men t Y stu dy, 2 and i t woul d have worked with Cinergy to formul ate a plan to all eviate the concerns identi fied in the MISO stu dy

. (Remedy Tr. at 5-972 to 974, 5- 989 to 990.) Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 26 of 5827 E. THE SO 2 CAP -a nd -T RAD E P RO GR AM Since 1995, under the acid rain cap-and-trade progr am, total SO 2 emissions from certain coal-fired electric generating units have been capp ed at 8.9 million tons. 42 U.S.C. § 7651b(a)(1) . In part, the purpose of the SO 2 cap- and -trad e pro gram is to a chie ve “reductionsin annual emiss ions of sulfur di oxide of 10 million tons from 1980 emissi on levels.” Id. § 7651(b). Within the SO 2 cap-and-trad e program, th e EPA has allocated SO 2 allowances to utilities; each allowance constitutes authorization to emit one ton of SO 2 for the specified year. Id. § 7651b(a)(1) ; id. § 7651a(3). ( See a ls o Remedy Tr. at 3-445 to 448.) Util itie s may p urchase needed allowances to cover their actua l emissions or sell extra allowances so long as they do not emit more SO 2 in total than the amoun t for which they have allowances. 42 U.S.C. § 76 51b(b); 40 C.F .R. § 73. ( See also Remedy Tr. at 3- 446, 4-698 to 700.) In addition, i f a company reduce s emissionsat one facility by putting

on controls, for example, the utility can sell thos e allowances to other uti lities, or use them in another part of its system. (Remedy Tr. at 3-44 5 to 446, 4-700.) C iner gy h as al ways operated wi thin its cap. ( Id. at 4-698, 4-704. ) The SO 2 allowance allocation for the Wabash River plant is appr oximately 12,000 allowances per year. ( Id. at 3-475.) If W abash River units 2, 3, and 5, are shut dow n, they will no longer emi t SO 2 , but Cinergy will retain those allowances for use elsewhere in it s system. ( id. at 3-446, 3-475 to 476, 4-698 to 699. ) Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 27 of 583 The Court notes th at the AOC was reached in r esponse to an enforcement action broug ht by EPA for a March 27, 1997, PM emissions test failure at unit 1. (Remedy Tr. at 2-414.) In conjunction w ith the AOC s ettlement, Ciner gy paid a $63,000.00 penalty . ( id. at 2-417 to 418.) 28 F. VIOLATIONS A T BECKJORD By Order dated September 28, 2007 (“ Beckjord Or der”), thi s Court conc luded that Cinergy exceeded limits established for par ticulate matter (“PM”) emissions at its Beckjord facility in violation of both an Administrat ive Consent Order (“AOC”), 3 a settlement contract thatCine rgy Co rp. had entered into with the Environment al Protection Agency (“EPA”), which was effective for the years 1998 through 200 0; and an Ohio State Impl ementation Plan (“Ohio SIP”), a permit and statutory obligation ofCincinnati Gas & ElectricComp any. Docket No. 984, at 2. Spe cifica lly, the Cou rt foun d that Cin ergyexceeded PM emissions limits on October 12, 1 999; October 21- 22, 1999; May 4, 2000; and May 26, 2000. Id. In addition, the Court conc luded that Plainti ffs could hold each par ty liabl e under the two set s of

obligatio ns because, in essence, t he duties thereun der were separate. Id. at 4-5. Since the Beckjord Or der issued, t he partieshave stipulated that the vari ous defendant entities

are jointly res po nsible for any penalty i mposed for the Beckj ord viol ations. Docket No. 1499, at No. 24. The Ohio SIP limit for PM emissions from Beckjo rd units 1 and 2 w as 0.1 pounds per million BTU. (Remedy Tr. at 2-415.) PM emissions at Bec kjord un its 1 and 2 arecontrolled b y devi ces known as electrostatic precipitators (“ESPs”) that were inst alled on th ose units in o r about 1974. (Boots Oct. 16, 2008, Dep. at 67-68; Boots Nov. 24, 2008, Rule 30(b)(6) Dep. at 150, 152- 54.) However, the Beck jord units ha ve no PM emi ssions conti nuous monitoring equipment; Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 28 of 5829 rather, compliance is measured throu gh periodic stack tests known as Method 5 tests. (Remedy Tr. at 5-1034 to 1035.) Method 5 tests are based on averag ing three h ours of data and are only performed periodi cally. ( Id. at 5-1042 to 1043.) The failed emissions test at Beckj ord unit 2 in October 1999, w as associated with

a test burn of alternative fuel , w hich was a mixture of coal and paper pel lets. ( Id. at 5- 1008.) This w as the only time that Beckj ord unit 2 bur ned this alternative fuel. ( Id. ) The parties ag ree that as a r esult of the PM emi ssions tests failure of October 12, 1999; May 4, 2000; and May 26, 2000; un it 1 was not in compliance for twenty-three days. ( Id. at 2-416 to 417; Defs.’ Ex. DR-333.) The pa rties also agree that as a result of the PM emissionstest failures of October 21 and 22, 1999, unit 2 was not i n com plia nce f or two days. (Remedy Tr. at 2-418 to 419; Defs. ’ Ex. DR-3 33.) At the time of these violations, the statutory maximum penalty was $27,500.0 0 per day per violati on. (Remedy Tr. at 2- 417.) After each emissions test failure, Cinergy promptly r emoved the unit from service, hired an inspector, and made the changes and/or r epai rs to the ESPsthat the inspec tor recommended. ( Id. at 5-1000 to 1004.) Plai ntif fs presented ev idence at the re medy phase tri al about additio nal PM emissionstest failures at Beckjord no taddressed by the Beckjord Order. Beckjord uni t 1 failed another PM emis sions test i n October, 2003. ( Id. at 5-1004.) I n addition, Beckjord unit 2 failed a PM emissions tes t in April 2006. (Boots O ct. 16, 2008, Dep. at 68.) After the unit 1, October 2003, failure, Ci nergy l ooked to a different cons ultant to systematicallyidentify the problems assoc iated wit h the ESP on unit 1

. (Remedy Tr. at 5- Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 29 of 5830 1004 to 1007.) Ci nergy hi red NELS Consulting Service s to do a full ev aluation of the ESP

on unit 1. ( Id. at 5-1005.) NELS pe rformed a gas flow evaluation at that time and conclude d that it could significant ly reducethe emission r ate of the ESP throug h b ette r distributi on of the gas flow through theprecipitator . (Pls.’ Ex. 2054, at CINERGY1 404615.) Specifically, NELS recommend ed improvements in the verti cal distri bution of the air flow through the precipitator

. ( Id. at 1323469.) According to NELS, a 197 2 Research-Cottrell study had suggested to Cinerg y that horizontal flow throug h the precipi tator wasexcellent , however, vertical distri bution was poor. ( Id. at CINERGY1323472.) As a result of the poor vertical distributi on of gas in the E SP, gas only hit the top por tion of the pr ecipi tator. (Remedy Tr. at 5-1019 to 102 0.) NELS desi gned a set of baffles and v anes to allev iate this problem; Cine rgy i nstalled the baffles a nd vanes in May 2004. ( Id. at 5-1006 to1007.) There have been n o stack test fai lures at Beckjord unit 1 since i nstallation of the baffles and vanes. ( Id. at 5-1007.) Beckjord unit 2 failed a PM emissions test in April 2006. ( Id. at 5-1009.) I n or about February2007, Cinergy installed the baff le and vane sy stem in the unit 2 ESP that it had installed i n unit 1 in M ay 2004. ( Id. ) The parties ag ree that PM continuous emis sions monitors (“PM CEM S”) should an d could be installed on Beckjord u nits 1 and 2. ( Id. at 5-1045 to 1046, 5-108 6.) Such monitors have been install ed on a number of coal-fired uni ts. ( Id. at 5-1 046 .) Cur rent ly, the EPA has approved th e use of PM CEMS to determine compliance with PM limits for coal-fired utilities , at the source ’s option. ( Id. at 5-1 047 .) Howe ver, P M CEMS have a high Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 30 of 5831 “error band,”meanin g they are mor e susceptibl e to erroneou s read ingsthan ot her for ms of testing. ( Id. at 5-1035, 5-1037to 1040.) Cinergy’s expert, Richard McRanie (“McRanie”), testifie d that averagi ng timeis a key component in any emis sions limit

. ( Id. at 5-1043.) “ A longer av eraging time enables y ou t o squish the error out of measurem ent and arrive at the truth.” ( Id. ) Although the EP A recommends a 24-hour averaging time, McRanie testified that i f PM CEMS were used as

a compliance measurem ent tool at Beckjord units1 and 2, a 30-d ay averagi ng ti me would be sufficient to “squash the error out.” ( Id. at 5-1043 to 1044.)

II. DISCUSSION & LEGAL CONCLUSIONS The Court has addressed the available reme dies in this case in at least four orders. See Docket Nos. 647, 984, 1440, 1524. It is wi th that backdrop that the Court concludes the fo llowing.

A. REMEDIES F OR VIOLA TION OF TH E CA A A T WA BASH RIVER On November 1, 2005, this Cour t concluded that28 U.S.C. § 2462 barred Plaintiffs’ claim s for civi l penalties for violati ons of the CAA. In so concluding , the Cour t declined Plaintiffs’ invitati on to revi sit this C ourt’s deci sion in United States of America v. Southern Indiana Gas & Electr ic Co. , No. IP 9901692-C-M/F, 2002 W L 1760752 (S.D. Ind. July 26, 2002) (“ SIGECO ”), in which it held that a violation of the CAA’s preconstruction permit regulations is complete at the time the cons truction pro ject is compl eted

. Id. at *8. However, in the November 1, 2005, Order the Court declined Cinergy’s invitation to apply Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 31 of 5832 the statute of limitations in 28 U .S.C. § 2462 to bar Plaintiffs’ cl aims for equitab le relie f because the equitable relie f sought by Plaintiffs was merely compensation f or the injury caused by Cinergy’sviolati on of the CAA and w as not a penalty . Docket No . 647, at 8-9. This ruling i mplied that inj unctive r elief in the f orm of mitiga tion or remediation fo r past harm caused by the viola tion would be availabl e. The Court clarified its v iew on thi s issue by Order dated October 14, 2008. See United States v. Ci nergy Corp. , 582 F. Supp. 2d 10 55 (S.D. Ind. 2008) (cited to herein as Cinergy II ; refer red to herein as “ Scope of Remedies Or der”). Relying upon Porter v. Warner Holding C o. , 328 U.S. 395 (1946), and its prog eny, the Cour t concluded that the remedy provisi on of the CAA applicable to Cinergy’s NSR v iolationsat W abash River did notlimitthe Court’s equitable pow er to prov ide remedies for past viol ations. Cinergy II , 582 F. Supp. 2d, at 1060 -62. Specifical ly, the C ourt stated: [I]n this case an order requiri ng [Ciner gy] to t ake a ctio ns th at re med y, mitigate, and offsetharms caused to the public and the environment by [its] past CAA vi olat ions wou ld s eem to gi ve e ffe ct t o the CAA’s purpose “to protect and enhanc e the quality of the Nation’s air resour ces so as to promote the public heal th and welfare.” 42 U.S.C. § 7401 (emphasis add ed). See also 42 U.S.C. § 7470 (stating the purp ose of the PSD prog ram is “to protect public health and welfare from any actual or potential adverse e ffect . . . from air pollution”) . This Court therefore conclude s tha t it s equitable authority granted by [42 U.S.C. § 7413(b)] inc ludes the authori ty to order relief aimed at redressing the harm s caused by [Cinergy’s] established violations of the CAA. In other words, this Court’s equitable auth ority i s not limit ed to provid ing pr ospe ctive relie f on ly. Id. at 1061-62. In addition, the Court concl uded that any ruling on the prop riety o f an y retro acti ve mitigation remedy at that time was p remature: Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 32 of 5833 This Court has i ndicated that a s ignificant del ay be twee n a violat ion and [Plaintiffs’] filing sui t may b e relevant in determining whether togrant inju ncti ve relief or other equitable r elief at all. Such a del ay may al so be rel evant in determinin g the exte nt of such reli ef to be awarde d. A determination on these quest ions awai ts t he presentation of evidence and factual developmen t at trial, however. Id. at 1066. By Order dated January 7, 2009, the Court confirmed that trad itional pri nciples of equity would apply to the Court’s consideration of the appropriate injunctiv e re lief in this

case. Docket No. 1524. The Court conc luded that Weinberger v. Romero-Barcelo , 456 U.S. 305 (1982), compel led the Court to weig h the equiti es rather than conclude that the Jury’s finding of a viola tion auto mat icall y enti tled Plain tiffs to injun ctive relief. Doc ket No. 1524, at 9. See also Sierra Club v. Franklin County Power of I ll., LLC , 546 F.3d 918, 935- 36 (discussing the application of tradition al injunctive relief analysis a fter eBay Inc. v. MercExchange, L.L.C. , 547 U.S. 388 ( 2006), to a cit izen suit under the CAA) . Therefore, to determine the approp riate relief for Ci nergy’ s viol ations of the CAA at Beckjord, t he Courtwill consider (1) whether Plaintif fs have suffered an irreparable inj ury; (2) whether there are inadequate remedies available at l aw to compensate for the injury; (3) whether, considering the balance of hard ship s bet ween P lain tiffs a nd Cin ergy, a remedy in equity is warranted; and (4) whe ther a permanent i njunction would not d isservethe public i nterest. eBay , 547 U.S. at 391. Plai ntif fs contend that a mult iple-part r emedy is warranted for Cinergy’s violati on of the NSR prov isions of the CA A for the p rojects at Wabash River Units 2, 3, an d 5. Spec ific ally, Plaintiffs arg ue for (1) the i mmediate shut d own of Wabash River units 2, 3, and 5; and (2) mit igation of the ex cess emissi ons from Wabash River units 2, 3, and 5, by Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 33 of 5834 (a) installation of BACT on W abash River units 4 an d 6 (or reti rement of unit 4); and (b)

over a twenty -year period, surrender of SO 2 allowances correspondi ng to the to tal SO 2 excess emissions. Plaintiffs asse rt that they have shown significant and irreparable harm to the envir onment from emissions from Wabash River units 2, 3, and 5. The irreparable harm includessignificant PM2.5 effects that extend throu ghout the Mi dwest and i nto the Eastern states of New York, N ew Jersey and Connecticut ; ground- lev el ozone effects in the same regions ; acid rain depos ition effec ts in the foreste d areas of the Mi dwest; and mercuryeffects withi n a 250-mile ar ea of the Wabash River plant. Although cl osure of Wa bash River units 2, 3, and 5, would have an immediate posi tive impact o n the healt h effects from those emissions, Pla inti ffs argue that t he “Court sh ould . . . cr aft mitigation that confers the maximum env ironmental benefit r elated to the ki nd and degree of the harm from the viola tions.” ( Pls.’ Propos ed Concl. of Law, at 36 (citing United States v. Deaton , 332 F.3d 698, 714 (4 th Cir . 200 3)) .) T hus, Pla inti ffs argue, addit ional future reductions in the same airshed are necessary to balance out th e pollution that Cinergy never would have emitted if it had follow ed the law. ( Id. at 32.) In addition, Plaintiff s suggestthat the Court order Cinergy to surrender SO 2 allowances i n an amount equal to the total SO 2 excess emissions, with the total allowance surrender coming prio r t o 2029, to ensure t hat reducti ons taken at Wabash River uni ts 4 and 6, do not r esult in inc reased emissi on s elsewhere

. ( Id. at 38.) Acco rding to Pl aintiffs, “This ens ures the best possible nexus between the violations and the remed y.” ( Id. ) Cinergy asserts that , if the Court concludes that Plain tiffs have establ ished irreparable harm, it agrees with Plaintif fs that r etirement of units 2, 3, and 5, is an appropriateremedy. H owever , Cinergy contends that the most equit able remedy i s for Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 34 of 5835 Cinergy to retire t he units in 2012. In additi on, until retirem ent of the unit s, Cinergy proposes to operate units 2, 3, and 5, at a rate approximately equivalent to the pre-project emissionslevels, or the Rosen baseline levels. Cinergy argues that this solution provides the best balance of harms, keeping in mind the publ ic interest

. Moreover, Cinergy cont end s tha t Pla inti ff s’ pro pose d rem edia l mea sure s have an insufficient nexus to C inergy ’s viol ation of the NSR pr ovisionsof the CAA. Ci nergy as serts thatthe SO 2 allowance program i s separate and apar t from its obli gations under the NSR provisi ons and one should not be used to reme dy the oth er. (Cinergy Pro posed F indings

o f

Fact & C oncl. of Law, at 65-67.) In addition , because Plaintiff s have dropped their claim s against C inergy for any violatio ns at W abash Ri ver units 4 and 6, Cin ergyavers that Plai ntif fs should not be al lowed toachieve through mitigation what they chose not pursue in court. In other word s, there is no nexus between the Jury’s f indings th at Cinergy violated the NSR on projects at W abash River units 2, 3, and 5, and pollution controls on W abash River units 4, and 6. ( Id. at 66-67.) F urthermore, C inergy argues that to the extent thatit should hav e to mitigate any “excess emissions,” retirement of units 2, 3 , and 5, will accomplish that task; any attempt to put controls on units 4 and 6 (with combined, yearly emissionsnearly dou ble t hat of unit s 2, 3, and 5, col lectivel y), exceeds the scope of the violatio ns. ( Id. at 67.)

1. Plaintiff s Proved Irreparable I njury & Inadequ ate Remedies at Law Atthe outset, the C ourt must note that it declines Cinergy’s invi tation to decide on the appropriate r emedy in a pi ecemeal fashion. Throu ghout the remedy phas e Cinerg y separately analyz ed the prospecti ve remedy of shut down of Wabash River units 2, 3, and Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 35 of 5836 5, f rom the mitig ation remedy of controls on Wabash River units 4, and 6, coupled wi th surrender of SO 2 allowances equivalent to the excess emi ssions from Wabash River units 2, 3, and 5, from thedate of the project s to the present. C inergy fails to recog nize that th e appropri at eness of each of these remedies depend upon Plainti ffs’ showing of an irreparable injury and an ina dequat e reme dy at law, as well as the balance of harms, including the pub lic intere st, weighing in Plaintiffs’ favor . The proof is the s ame; the question is whethe r the equities warrant all of the reli ef Plaintiffs request if they proved the first two elements. Thatbeing said, the Court concludes that the evidence of environmental harm from non-permitted SO 2 emissions and, to a lesser extent, NO x emissions, from Wabash River units 2, 3, and 5, from the d ate of the project through 2007, compe l s a finding of irreparable injury for which there is no ad equate remedy at law. There is no dis pute that the Jury in this matter conclude d that Cinerg y viol ated the NSR pr ovisionsof the CAA when itunreasonably failed to expect a net increas e of 40 tons or more of either SO 2 and/or NO x emissionsas a proxi mate result of the refurbishment projectsat Wabash River units 2, 3, and 5. The Court was persuaded by Plaintiffs’ ex pert, Dr. F ox, that at t he time of th e W abash River projects, LAE R for SO 2 control w as an FGD with a95% re mova l eff icien cy. (Remedy Tr. at 2-307.) Ciner gy pres ente d litt le an d unp ersu asive evidence to contradict Dr. Fox that an FGD with a 95% removal efficiency w as running at a coal-fire d generating unit in the United States at t he time of the projec ts with reportedly good, if not g reat, success. ( Id. at 2-318 to 319.) In addition, t here waspublished li terature on the subject and the manufacturer of the unit that was alr eady running had applied for a pa tent for an Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 36 of 5837 FGD with a 99% removal effici ency. ( Id. at 2-319 to 320.) As such, the Co urt can only conclude thatLAERfor SO 2 removal at the time of the proj ects was, at a minimum, an FGD wi th a removal efficiency of 95%. Rarick’s assertion th at Cinerg y woul d have appli ed for a synthet ic minor permit cap for SO 2 emissions i nstead of install ing LAER at the time of the W abash River projects is notcredible. Not only h ad another coal- fired plant installed an FGD at the time of the projects, there is no evidence that Cinergy had ever or has ever o btained a sy nthetic minor permit for any coal -fired unit. (P earl Oct. 30, 200 8, Rule 3 0(b)(6) De p. at 60 .) Cinergy admitted that such p ermits were much more common for combustion turbi ne units that operate only durin g p e riods of peak ener gy demand. ( Id. at 60-61.) As Pearl testi fied, coal-fired units, such a s Wabash River units 2, 3, and 5, are “base-l oad units” th at Cinergy would “want . . . avail able to operate at all times, s o [it is] muc h mo re hesitant to restrict their o peration,” aswould be r equired by a syntheti c minor permit . ( Id. at 61.) Pearl’s testimony is consis tent with Cinergy’s reasons for undertaking the Wabash River projects in the first place—life extens ion of the base-loa d units. For these reasons, the Court concludes that i t is unlikely that C inergy would have sought a sy nthetic minor permit cap for SO 2 emissions at W abash River units 2, 3, and 5, at the time o f the projects. The Court has co ncluded that LAER for SO 2 at the time of the Wabash River units 2, 3, and 5, projects w as an FGD w ith an SO 2 removal efficiency of 95%. T he Court also concludes that Dr. Fox’s method for calculating the excess emissionsfor SO 2 as a result of

the projects most accuratel y reflectsthe intent of theNSR to measure emissions permit compliance on an annual basi s. Therefore, the C ourt conclude s that the excess SO 2 Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 37 of 5838 emissionscaused by the projects at W abash River units 2, 3, and 5, total 3 59,000 tons, in the time peri od from the date of the proj ects throug h 2007. However, the Court w as persuaded by Ciner gy’s experts, Rarick and D ePriest, that BACT for NO xwas a low-NO xbur ner, not a n SC R. A t thetimeof the projects, the uncontested fact is that no SCR had been install ed on a coal-fir ed generating unit in the United States. (Remedy Tr. at 2- 325 to 326, 4-889.) Moreover , there was evidence that SCRs on coal-fire d units in Europe and Japa n had run into pr oblems when us ing high

sulfur coals, coal more similar to that available in the United States. ( Id. at 2-403, 4-559 to 569.) In addition, the EPA rule-makin g comments in June 1991 indi cate that even at that time SCR was not used in t he United State s. ( Id. at 4-887 to 888, 4 -890.) In that publication, the EPA recommende d low-NO x burners as BACT for NO xemissionscontrol. ( Id. ) Altho ugh ne ver promul gated into arule, the EPA’s com me n ts are strong evidence that BACT in 1989 and 1990 for NO xemissions was low-NO x burners, not SCR. Cinergy installed low-NO xburners that wou ld meet an emissi ons limitati on of 0.6 pounds per milli on BTU on unit 5 at the time of tha t pr oject. ( Id. at 4-889 .) Cinergy installed a similar low-NO x burner on unit 3 a few y ears after the modi fication to that unit thatis at iss ue in this cas e. ( Id. at4-889.) Even with these installations, Cinergy’s excess emissions of NO x totaled 4,865 tons , through 2009. ( Id. at 5-946 to 947.) L ike Plaintiffs’ ex pert, Dr. F ox, Ciner gy’s expert, Ra rick, opine d that at the time o f the projects, i nstallation of BACT for NO xemissions w ould have been the most reasonable presumption for how Ci nergy w ould have appl ied for a permit at the time of the projects on Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 38 of 584 These excess emissions w ere calculated by Plain tiffs’ expert, Dr. Fox , from the date of the projects through 2007. (Remedy Tr. at 2-230 to 231.)

5 These excess emissions w ere testified to by Ciner gy’s expert, Ra rick, from the date of the projects through 2009. ( Id. at 5-946 to 947.) 39 W abash River units 3 and 5. ( Id. at 5-947 to 948.) TheCourt has no reason to doubt th is conclusion and hereby adoptsit. G iven the Court’sconclusion t hat Cinerg y’s failur e to apply for permits an d instal l LAERfor SO 2 emissions co ntrol , and BA CT for NO xemissions co ntrol at the ti me of the W abash River units 2, 3, and 5, projects, r esulted in 3 59,000 tons of excessSO 2 emissions 4 and 4,865 tons ofexcess N O x emiss ions, 5 the Court now turns to Plaintiffs’ proof of irreparable harm caused by these excess emissions. The Court is per suad ed by P lain tiffs’ e xpert s, Dr. Schwa rtz and Chi nkin, that secondary PM2.5 formed in theair from emissi ons of SO 2 and, to a lesse r exte nt, NO x , from the W abash River plant has a significant impact on huma n health in Indiana, Illinois, Wisconsin, Michigan, Ohio, and Kentuck y. ( Id. at 1-141 to 149, 1 -138, 1-171 to 173 .) This is evidenced by the relatively high concentrations of secondary PM2.5 in those

areas as predicted by Chinki n’s CMAQ and CAMx model s. ( Id. ) Although thos e predicted levels do not by thems elves appr oach the NAAQS, t heyare signi ficant because the NAAQS is a regional standard that measure s the PM2.5 total from all sources w ithin the region. ( Id. at 1-118, 1-194 to 197, 3-63 4 to 637.) The Court fou nd credible Chinkin’s statement that the annual ex cess emissi ons from Wabash River units2, 3, and 5, alone would rank among the top 5% of sources of SO 2 pollution in the Eastern U nited Statesand would have a substantial and meaning ful impac t o n the PM2.5 concentration in Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 39 of 5840 nonattainment areas. (Remedy Tr. at 1-212, 1-118, 1-194 to 197.) Hayes, one of Cinergy’s experts, t estified that the an nual excess emissions of SO 2 is equivalent to the SO 2 emissions from al l other sour ces of the gas i n the State o f In diana. ( Id. at 3-641.) And, the Wabash River annual excess SO 2 emissions is approximately two times that of the total annual SO 2 emissions from all poi nt sources i n all six counties of the D ayton Regional Air Pollution Control Agency, which is in a nonattainment area within the relevant geography of the Wabash River plant. ( Id. at 2-242 & 2-321.) Reductions in secon dary PM2.5 of the magnitude of that contributed by the annual excess emissions from W abash R iver Units 2, 3, and 5, could effect the nona ttainment status of several com munitie s including Dayton, Ohi o. ( Id. at 2-225.) These opinions and figures, that the Court adopts, evidence that Cinerg y’s un-pe r mitted e missions arequantitativ ely sig nificant. The measurable secondary PM2.5 from emissions at the W abash River plant extend as far as New York, N ew Jersey and Connecticut . ( Id. at 1-141, 1-143 to 147.) Althoug h the effects in these states are less severe than the ef fects closer to the W abash River p lant, an y reduction in PM2.5 formation coul d impact a reg ion’s attainment status. ( Id. at 2-259.) The relevant public health advisory groups ag ree that P M2.5 cause s decreased l ung function, increased pr evalence of res piratory symptoms, w orsened respiratoryinfections, heart attacks, and early death. ( Id. at 1-49 to 54.) These same groups conclude that there is clear and con vi ncing sci entific evi dence that sig nificant adver se human-health effects

occur in response t o exposuresto PM2.5 at and b elow the 15μg/m3 of the curr ent annual PM2.5 NAAQS. ( Id. at 1-50 to 54; Pls.’ Ex. 1911.) Because the rel ationship betw een the does-response curve for PM2.5 and mortality is linear, an y reducti on in PM2.5 Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 40 of 5841 concentration would have a corresponding reduction in mortality rate. (Remedy Tr. at 1-50 to 54, 1-85 to 87. See also id. at 4-873 to 877.) The Court was not persuaded by Cinergy’s expert that the HAPS report and TERA report indicate that SO 2 and NO xemissions hav e no adverse health effects for the r easons stated in the Factual Background section of this Order. Cinergy also argues that Plaintiffs’ data is not particul arized enoug h to warr ant a finding that excess emissions from W abash River had s ign ificant d etr imen tal env iro nmental e ffe cts because the PM2.5 CMAQ a nd CMAx model numbers are sm all compared to the NAAQS. But, as stated earlier, the NAAQS is not the standard agains t which a single sou rce i s meas ured. Rather, the NAAQS is a reg ional limit for PM2.5 from all sources w ithin that re gion. ( Id. at 1-197, 3-634 to 637.) The uncontr overted ev idence is that the annual SO 2 exce ss emi ssio ns from W abash River units 2, 3, and 5, not only exceed the 40-ton thr eshold in the N SR provi sions of

the CAA, those excess emis sions alone co uld be ranked in the top 5% of all contributors to the NAAQS in the Eastern U nited States. ( Id. at 1-212.) By any mea sure , the nega tive effects from such pollut ion is sig nificant. The Cou rt also rej ects Cinerg y’s arg ument that there can be no excess SO 2 emissionsbecause it al ways stayed wi thin its li mits under theSO 2 cap and tradeprog ram. Cinergy’s obligations under the ca p a nd trade prog ram are separate from its responsibil ities under the NSR program. The purpose of the NSR is to ensure that older facilitiesthat undergo certain major mod ifications ar e brought w ithin tig hter emissions standards. 42 U.S.C. § 7470. Ciner gy is required to meetthis oblig ation whether or not itcan continue to meet its oblig ations under the cap and tr ade pro gram. The responsibi lity under NSR is not fungible li ke Cinerg y’s all owancesunder the cap and trade progr am. In Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 41 of 5842 other words, C inergy cannot escape r esponsibili ty for operati ng Wabash River units 2, 3, and 5, w ithout a prop er per mi t as r equired by the NSR provisions of the CAA because another prov ision of the CAA allows i t to look at its total emi ssions under a regional cap. For this Court to so hold would render the NSR provisions superfluou s. Althou gh the Court di d not agreewi th Pl aint iffs assertion that Cinergy’s excess NO x emissionswere in the tens ofthousa nds, Cin ergystill emitted excess NO x . Therefore, the Court concludes that such excess NO x emissions w ould cause a neg ative effect w ith respect to ground l evel oz one, but not theeffects testified toby Chink in as predic ted by the CMAQ and CAMx models. With respect to Pl aintiffs’ proof of acidic deposi tion impactsand mercury impacts, the Court concl udes that Plaint iffs did not prov ide sufficient nex us between therelevant

excess emissions and the negati ve envi ronmental and healt h effects to support a concl usion of irr eparab le har m. In summary, the C ourt concl udes that Plaint iffs have proven that the excess SO 2 and NO xemissions from Wabash River units 2, 3, and 5, had signific ant health and environmental effects in t he for m of PM2.5 in the s tates of Indiana, Il linois, Wisconsin, Michigan, Ohio, and Kentucky. Such health and env ironmental effects ar e irreparabl e and ther e is no adeq uate reme dy at l aw.

2. Equity Demands Shu tdown of Wabash River Units 2, 3, and 5, No Later T han Septemb er 30, 2009 & Surrender of Certain Allowances The Court concl udes that the balance of harms wei ghs heavily in favor of a relatively immediate shutdown of Cinerg y’s W abash Rive r units 2, 3, and 5. When it enacted the Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 42 of 5843 NSRprovi sions of the CAA, Congress struck a bal ance in favor of pollution contr ols on units for which a major modificati on was ex pected to result in an increase in net emissions of

40 tons or more of either SO 2 or NO x . 42 U.S.C. §§ 7475(a), 7479( 3), 7502(c)( 5), 7503, 7411(a)(4), 7477. Cinerg y was aware of this legisla tion before it un d ertook the W abash River units 2, 3, and 5, projects. See United States v . Cinergy C orp. , 495 F. Supp. 2d 892, 908-09 (S.D. Ind. 2007). Thereis no doubt that Cinergy has benefitted from its decision to proceed wi th its life ex tension p roj ects without installing pollution controls on W abash River units 2, 3, and 5: it obtained an additional approximately twenty years of servicefrom these “base-load”coal-fired uni ts. (Pls. ’ Ex. 1955, at PSI 0083177, PSI 00 83172; Pls.’ Ex. 1319, at CINWA002121-22; Remedy Tr. at 2-271 to 272, 2- 300 to 3-02, 2-306 , 2-315 to 317.) Moreover, despite a finding of liability for the Wabash River uni ts 2, 3 , and 5, projectsby the Jur y on May 22, 2008, Ciner gy took no action to determine the

c onsequenc es that a decisi on to close thos e units wo uld have on th e Terre Haute l oad pocket, or on the broader region. The evidence i s clear tha t Cinergy ha d already determined by that time that installation ofpollution control technology on those units was noteconomical. Ea rlier in May 2008, Turner submi tted testimo ny to the I URC that Cin ergy would consider cl osure of the older units, like Wabash River units 2, 3, an d 5, as tigh te r clean ai r rest rictions w ere implemented. ( Pls.’ Ex . 1971, at CINE RGY 1407877-78 ; Remedy Tr. at 4-720 to 722.) Likewi se, at trial , Turner testi fied that Cinerg y has ruled out controlling those units. (Remedy Tr. at 4-679 to 680, 4- 730.) Yet, after a finding of li ability under the NS R with re spec t to t he W aba sh Rive r unit s and knowin g that the a ltern ative

was to apply for the necessa ry permits o r shut do wn the uni ts, Ciner gy did noth ing. It did Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 43 of 5844 notc u rt a i l i t s e m i s s i o n s fr o m Wa ba sh River units 2, 3, and 5; it did not r equest an Attachment Y stud y f rom MISO to have answersfor the Court at the remedy phas e trial about the consequence s of a decision to immed iately shut down those units. By its actions , Cinergy has indicated to the Court a failure to res pect th e balan ce struckby Cong ress in theNSR and less than due regard for the dispute resolut ion process presided over by this Court . Cinerg y’s appar ent inabilit yto appreciate the relevan ce of the regulatoryscheme and the Jur y’s verdict was made plain by Turner’ s testimony . Turner test ified that shortly after the Jury rendered its verdict in May 2 008, he learned that th e remedy Plaintiffs soug ht was eit her install ation of pollution con trols or imme diat e shu tdown of

Wabash River units 2, 3, and 5. (Turner , Nov. 11, 2008, Dep. at 195; Re medy Tr. at 4- 739.) But, the following dialog took place during Turner’s depo sit ion on November 11, 2008, in preparation f or the remedy phase trial: Q. Okay. In y our mind is the sh utdown of Units 2, 3 an d 5 before 2012 a possibili ty as a r esult of this l itigation? * * * A. – that I think a re [sic] not acceptable. Q. Okay.

. . . And what steps, in your view , has Duke taken to address the possibility that Units 2, 3 and 5 could be shut down befor e 2012 as a result of a court order? A. Atthis point w e are, I gues s for lack of a better way to say it, we’ re not planning for that to happen. If th e Cou rt te lls us othe rwise, we’ll h ave to change our plans. Q. Okay. An ho w, in you r view, d oes t hat s how t hat Duke h as acted prudently wit h regard to r eliability if it has not done any planning yet for the possibil ity of Units 2, 3 and 5 being shut down befor e 2012? [A.] W ell, I think we’re being prudent in every way t hat we’relooking at the remedy phase of this cas e and that the remedy we haveproposed is Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 44 of 5845 the most prudent. I’m hoping we are not ordered to do s omething that I think wou ld be less prudent than – than the r emedy or the – the – the offer t hat w e’ve made in this case, but if we’re ordered to do something other than the prudentremedy that w e’ve carv ed out here or we’ve proposed, we will quickly assessplans and – and shift gears. * * * Q. Okay. I mean, why haven’tyou assess ed the – the reli ability impacts of shutting dow n before 2012? * * * [A.] I – I think we have a sens e of the re liab ility im pact s of shut ting d own before 2012. I don ’ t know that we’ve done – I don’t know what kind of

deta iled stud ies yo u’r e looking for , but I think w e have an understanding of it as I beli eve the MISOwitness testified as w ell, and in addition to that we believe, you know, it makes sense to wait until Edwardspor t comes on line. (Turner, Nov. 11, 20 08, Dep. at249-50.) Si milarly , at the remedy phase trial Turner testified thatat the time Ci nergy’ s answers to interrog atories were filed on Octo ber 8, 2008, Cinergy did not con tact MISO to r equest any kind of reliab ility study connec ted to the closure of Wabash River units 2, 3, and 5. (Remedy Tr. at 4-7 29.) Specifical ly, Turner testified: A

. . . W e woul d not have asked MISO i n 2008 to conduct th at study for a 2012 shutdown. Q Because you decided 2012 wasthe right date for the shutdow n, right? A I dec ided it was t he m ost a ppro pria te re med y. ( Id. at 4-729.) Cinergy’s move in December 200 8 to curtail its emissi ons from Wabash River units 2, 3, and 5, in 2009 comes to o late to mitigate the consequence s of the Jury ’s a nd the Court’s conclusion t hat Cinerg y has failed t o appreciate the significance of its decisi on to Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 45 of 5846 ignore the balance struck by Con g ress in the NSR prov isions of the CA A. Cinerg y has emitted several hundred thousand tons of excess emissi ons since the da te of the projects and, even fa ced with a Ju ry verdict again st it, Cine rgy did nothing to account for it s actions except propose a plan i n its own best interests and one that comp orts close ly to it s own business plan. All of these factors wei gh in favor of immediate shut down of Wabash River 2, 3, and 5. The Court is mi ndful, however, that theMISO report raisessome legiti mate reliabil ity

concerns if W abash River units 2, 3, and 5, are immediately shut down. However, the evidence supportsa conclusion that Cinerg y has been aw are of the need to upgrade the Dresser substation by installin g a third t ransformer becauseit had planned to supply pow er through that stat ion f rom i ts ne w Edward spor t, In dian a, pl ant. (Reme dy T r. at 4-66 2, 4- 67 4, 4-686, 4-690 to 692.) Moreov er, the MISO report indicates that MISO’ s reliab ilit y

concerns are greatest for the summer months when tem peratures are likelyto exceed 90 degrees Fahrenheit. (Defs.’ Ex. DR 321, at CINE RGY 1665224, CINERG Y 1665229; Remedy Tr. at 5-967.) The Court must take these concerns seri ously becaus e reliabil ity of

electrici ty in the T erre Haut e load p ocket co uld imp act the public. Taking th is into account in the balance, allowi ng Cinerg y to run Wabash River units 2, 3 , and 5, at t he Rosen baseline levels, which is where Turner curr ently order ed them to be run, thr ough the

summer months of 2009, but no longer , would al low Ci nergy and MISO time toperfor m a ful l-blo wn Attach ment Y stu dy; and wou ld allow Cine rgy to make alternative plans to make upgrades to t he Dresser substation. In addition, the C ourt concludesthat surrender of SO 2 emission allowances approximately equal to amount of SO 2 excess e mi ssions from Wabash River units 2, 3, Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 46 of 5847 and 5, in the peri od from May 22 , 2008, to September 30, 2009, as an addi tional remediation measure is appr opriate. The Cour t considers three factors when itevaluates remediation measures: (1) whether the measure “‘would confer maximum env ironmental benefits;’” (2) w hether the measure is “‘achievable as a practical matter;’” and ( 3) whether the measure bears “ ‘an equitabl e relationshi p to the degreeand kind of wrong it is intended to remedy.’” United States v . Deaton , 332 F.3d 698, 714 (4 th Cir. 2003) (qu oting United States v. Cumberland Farms of Conn., Inc. , 826 F.2d 1151, 1164 (1 stCir. 1987)). Under Plaint iffs’ remedy pr oposal, the surrender of SO 2 emission all owances w as tied to their mitigation proposal that the Cou rt require Cinergy to install BACT on units 4 and 6, to further r educe the emissi ons in the Wabash River r egion and to ens ure that Cine rgy does not benefit from i nstallation of pol lution contro l technology on those uni ts

. The Courtagrees wit h Cinergy that Plainti ffs’ mitigation proposal does not bear an equitable relationship to the degree and kind ofharm it is intended to remedy. There is no dispute that W abash River units 4 and 6 have combined em issions that are twice that of units 2, 3, and 5, combi ned. (Remedy Tr. at 1-177 to 178, 3-632 .) For the Cour t to order Cinergy to insta l l pollution control technol ogy on thos e units wo uld far exceed any mitigatio n remedy just ified by Plai ntiffs evidence of i rreparable ha rm. Plainti ffs have not proven thatCinergyviolated any CAA pr ovisionswith r espect to units 4 and 6. Therefore, itis the Cour t’s view that imposition of such a remedy is punitive in nature and the Court has already determined that such rem edy is not available to Plaintiffs fo r Cinergy’s violatio ns of the NSR fo r the projec ts at Wabash River units 2, 3, and 5. Thus, any surrender of SO 2 allowances that is ti ed to installati on of pollution cont rols on units 4 and 6 is also a pe nalty w ithout sufficient nex us to the vi olation to be co nsidered miti gation. Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 47 of 5848 On the other hand, by closing W abash River units 2, 3, and 5, in the relativ ely near future, Plaintiffs and the pub lic wi ll enjoy a significant reduction i n SO 2 and NO x emissions in the region. The Court’s remedy will require Cinergy to retire units 2, 3, and 5, at least three years so oner than it w ould have other wise, an d l ikely mor e years earlier gi ven Turner’s testimony that absent this law suit, Cinergy did not plan to shut down those units. (Remedy Tr. at 4-675.) This is a sig nifi cant ste p tow ard reme diat ion by i tsel f. However, surrender of SO 2 allowances tied to excess emissi ons from Wabash River units 2, 3, and 5, for the time period after the Jury determined liabilit y and until September 30, 2009, t he date upon which the Court has ordered herein f or shutdown to occur, would further confer

an environmental benefit to the reg ion, and bears an equitable r elationship to the degree of

harm it is designed to r emedy. Permanent surrender of SO 2 allowances confers an environmental benefit to the reg ion that ha s been harmed by t he over 350,000tons of

excess SO 2 emissions from Wabash River units 2, 3, and 5, over th e past twenty years. Such a surrender would miti gate, in par t, the exces s emissions fr om Wabash River 2, 3, and 5, in t he yea r 2008, and mi tigat e the exc ess emi ssion s from t hose un its i n some fraction of the previous years. Moreover, despite Cinergy’s protest ation s otherwi se, surrender of allowances has been used in other cases as part of consent decrees in s uits by the EPA against power pl ant owners. See, e.g. , United States v. Am. Elec. Power Serv. Corp. , C o n s e n t D e c r e e , a t ¶ ¶ 70-8 4, 91 -99 (a va i l a b l e a t epa.gov/co mpliance/resour ces/decrees/civil/c aa /americanelectricpower-cd.pdf ). Be caus e such a surrender is tied to the facility and units for w hich Plainti ffs have pr oven Cine rgy liable, there is, as coined by Pla intiffs, a n “elegant nexus” between the surrender of th is Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 48 of 5849 specific number of allowances and the harm caused by Cinergy’s SO 2 excess emi ssions from Wabash River units 2, 3, and 5. The fact that Plainti ffs waited until 1999 to file this law sui t does not chang e the Court’s conclusion t hat shut down of W abash Rive r units 2, 3, and 5, should come as soon

as possible rather than on Cinergy’s time table or that surrender of some SO 2 allowances is equitable. The Court recognizes that Plaintiff s claims were filed approx imately ten years after the projects at issue. However, this fact cannot render i nsignificant Cinergy’s decisio n to perform life-ex tension projec ts at itsolder units without maki ng any kind of pr ediction of the potential for i ncreased emiss ions from those uni ts as requi red by the NSR provisi ons of

the C AA. Ci nergy h as be nef itte d fro m ne arly twe nty ye ars of additional se rvice from W abash River units 2, 3, and 5; Plaintiffs’ dela y in fili ng suit do es not o utweigh the seriousness of Cinergy’s NSR violations. Fin ally, although the C ourt consider ed the public i nterest w hen it decided th e appropriate ti me table for the shutd own of Wabash River unit s 2, 3, and 5, the Court will brieflyaddress Cinergy’s argument that the costof Plaintiffs’ prop osed remedy will affect its ratepayers. The Court rec ognizes that any remedy that does not coincide with Cinergy’s business plan wil l adverse ly affect Ciner gy’s b ottom line. In addition, it is possible that for certain types of remedies, Cinergy may be allowed to petition the Indian a Utility Regulatory Commission for rate changes to pay for thos e remedies. In these difficult eco nomic times, the Cour t cannot i gnore those pos sibiliti es. Howev er, the Court also cannot i gnore the Jury’s verdict that Cinerg y viol ated the NSR w hen it did not s eeka permit or take action to install LAER for SO 2 emissions controls and BACT for NO x emissions controls at the time of

the Wabash River units 2, 3, an d 5, project s. Plaintiffs have proven irreparable harm Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 49 of 5850 to human health an d the envir on ment as a result of Cinergy’s violations. The Court’s remedy atte mpt s to b alan ce th e nee d to re dres s the harm caus ed by C iner gy’s vi olati on with both Cinerg y and its ratepay er’s nee ds to control costs and is significantly less onerous than the reme dy proposed by Plaintiffs. In summary, for i ts viola tion of the NSR prov isions of the CAA for itsfour projects atWabash River units2, 3, and 5, as found by the J ury in th is matter on M ay 22, 2008, the Courtconcludes that the equities weigh i n favor of an inj unction. The follow ing injun ctive relief is appr opriate: 1. Cinergy shall shut down W abash River units 2, 3, and 5, no later than September 30, 2009; 2. Cinergy shall run Wabash River units 2, 3, and 5, at a r ate that does notexceed theRose n bas elin e em issio ns un til th e tim e it sh uts d own those unit s; un less Ciner gy can s how t he Court good cause for running thos e units above said baseli ne; and 3. Cinergy shall surrender, permanently, SO 2 emission allowances in an amountapproximatel y equal to the amount of SO 2 emission s from W abash River units 2, 3, and 5, from the period begi nning on May 22, 2008, through s hut down of those units on September 30, 2009.

B. REMEDIES FOR PM VIOLATIONS A T BECKJORD Plai ntif fs contend that the appr opriat e r emedy for Ciner gy’s four violati ons at Beckjord units 1 and 2 is for Cinergy to install a PM CEMS as a compliance measurement tool, with a 30- day aver aging ti me. Plaintiffs arg ue that this r emedy comports with the EPA’s standard touse any cr edible evi dence to determinewhether a source is i n violati on of

permitted li mits. See 40 C .F.R. § 52.12(c). I n addition, Pla intiffs assert th at the appropriatepenalty for the Beckjord PM violations is the sta tutory max imum penalty of Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 50 of 5851 $1.32 million. Plaintiff s calculated this amount by adding (a) the prod uct of the statutory maximum penalty of $27,500. 00 per day ti mes twenty -three days, the number of day s that Cinergy Corp. vi olated the AOC; t o (b) the prod uct of the statutor y maximum pen alty of $27,500.00 per day ti mes twenty -five, the number of days that C incinn ati Gas & Electric violated the Ohio SIP. (Pls.’ P roposed Concl . of Law, at 49.) Plaintiffs arg ue that such a penalty comports with the purposes o f the penalty pr ovisionsof the CAA, w hich include retribution, deterrence, and restitutio n. See Tull v. U nited S tates , 481 U.S. 412, 422 (1987). Plaintiffs contend t hat none of the evidence addu ced at trial warrants a reduction fro m the maxim um p ena lty. Cinergy asserts that the maximum penal ty is not warranted because of itsgood faith efforts to comply w ith its permit obligat ions. Specifically, C inergy arguesthatas soon as itbecame aware of each violat ion it shut down the unit, hir ed inspectors , and implemented the rep airs and /or chan ges recom mende d by the ou tside in specto r. In add ition, Cin ergy spentconsiderabletime and money as sessing th e appropriate modi fications to theESPs and implemented those c hanges. Since making those changes, Cinergy argues, there have been no PM v iolations at Beckjord. In addition, Cinergy avers that by addr essing the probl ems quickly , the serious ness of the vi ol atio ns wa s minimi zed. In to tal, Cine rgy contends that the factors w ay agains t application of the maximum penalty . Furthermor e, Cinergy arg ues t hat P lai ntif fs seek a double penalty for identical violatio ns of the Ohio SIP and the AOC at Beckj ord unit 1. Theparties h ave now stip ulated that th e various Cin ergy entities are jointly responsib l e for any penalt y assessed for violat ions at Beckj ord; ther efo re, Ci nergy a ssert s tha t the re is n o rea sona ble ju stif icat ion f or a d oub le pe nalt y. Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 51 of 5852 According to the Seventh C ircuit, w hen consideri ng fines under t he CAA, the Court should “gen erall y pr esume thatthe maximum penalty should be im posed. “ United States v. B&W Inv. Props. , 38 F.3d 362, 368 (7 th Cir. 1994). However, the Court shall take into cons ideration (i n addition to su ch other factors as justice may require) the size fo the business, theeconomic impact of the penalty on the b usin ess, the viola tor’s full c ompliance histo ry and g ood faith efforts to comp ly, the duration of the viola tion as established by any credible evidence (including evidence ot her than the applicable test m ethod), payment by the violator of p ena ltie s pre vious ly ass essed for the same v iolation, the economic benefit of noncompl iance, and the seriousness of the v iolation. 42 U.S.C. § 7413( e)(1). The C ourt has consi derable discr etion to det ermine the proper weight for each factor. B&W Inv. Props. , 38 F.3d at 368. Furthe rmore, a penalty may be assessed for each day ofviolation. 42 U.S.C. § 7413(e)(2). The Court concl udes that the statutor y maximum pen alty shoul d apply toCinergy’s violatio n of the Ohio SIP, but additional re cover y under t he AOC woul d not servethe interestsof justice in this case. Despite Cinergy’s avowal that it made good faith effortsto

ensure that its ESPs on Beckjord units 1 and 2 worked properly, and to make necessary upgrades of the eq uipment to improve air flow through the unit to improve results, i t took Cin ergyfour years to implement the ke y change in vertical airflow to the ESP on unit 1

. Althou gh the 1972 study that sugg ested that verti cal airflow was a pr oblem is not conclusive, a history of successive failures in 1 999 and 2000 a t un it 1 sh ould have prompted Cinergy to delve deep er into the pr oblems wit h the ESPs. Mor eover, after discovering the verti cal airflow problem on theunit 1 ESP in late 2003, Ciner gy waited until unit 2 failed another test in Ap ril 2006 to consi d er making th e necessary vertical airflow adjustments to the ESP on unit 2. In fact, Cinergy waited unti l February 2007 to implement such improvements on the unit 2 ESP. Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 52 of 5853 Althou gh Cine rgy c ontend s that its pr ompt actions once it learned of a v iolation reduces the seriousness of the viola tion, such a v iew fails to consider t hat Method 5 is not

a continuous monitoring measur ement. Rather, it is a spot-c heck ofthe avera ge of three hours worth of emissions. Such a method does n ot account for thepotent ial that Cinergy violated t he Ohio SIP at oth er times duri ng whic h no test wa s performed. The Court notes t hatCinergy’s violations at unit 2 in 1999 could have been caused by its testburn of an alternat ive fuel. Ther e is no evi dence, however, that Cine rgy al erted any regulatory authority about its testburn or negotiated any kind of permit varianceduring the test burn tha t would hav e mitigated t he seriousness of a two-day violati on. The Court is not conv inced, howev er, that penali zing theindivid ual defendants under each of the agreement s is just given t he parties ’ stipula tion tha t all of the Cine rgy defendantentities are jointly liable for t he PM viol ations at Beckj ord units 1 and 2. As Plai ntif fs point out, the purposes of the CAA penal ty prov i sions incl ude retributi on, deterr enc e, and restituti on. See Tull , 481 U.S. at 422. Requiri ng the Ciner gy entit ies to pa y the maximum daily penalty for all violations under the Ohio SIP serves all of thes e purposes. Turning now to the ap propriate in junctive relief, the part ies larg ely agr ee that the Courtshould require Cinergy to install PM CEMS on B eckjord unit s 1 and 2 for conti nuous emissionsmonito ring. The Court agrees that the evidence presented at the remedy phase trial supportsa conclusion that continuous emi ssions monitoring is an appropriate r emedy for Cinergy’s viol ations of the Ohio S IP and the AOC. There is little doubt that the ha rm caused by violation of emissions li mits is irr eparable, and the C ourt so concl udes. In addition, monetary penal ties cannot d eter co mpletely the harm caused by Cinergy’s Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 53 of 5854 multiple violati ons of em issions limits. As a result, continuous emissions m onitoring like tha tprovided by PM CEMS is a logical remedy to ensure that Cinergy complies w ith th e O hi o SIP. The Court notes, however, that using a PM CEMS as a complian ce measurement tool on a dail y basis i s inappropri ate give n the evidence th atthe device has

a high err or band. The Court found this evidence c redible. Pur suant to these findi ngs, the Court concl udes that the use of thePM CEMS on Beckjord uni ts 1 and 2 for compliance purposes is appropri ate only i f the averagi ng time is thirty da ys. (Remedy Tr. at 5- 1043 to 1044.) In summary, the Court concl udes that Ciner gy must pay the maxim um statutory penalty of $27,500.00 per day , for twenty -five d ays of vi olat ion of the Ohio SIP; the interestsof justice make an additional penal ty under the AOC exces siv e. In addition, Cinergy shall be required to install a PM CEMS for continuous PM emissions monitoring

on Beckjord uni ts 1 and 2. The PM CEMS dev ices shall be used for compli ance purposes only if a thi rty-day averagi ng time is used.

III. CONCLUSI ON & ORDE R For the reaso ns stated herei n, the Court ORDERS the fo llowing: As the remedy for defendants ’, Cinerg y Corp., PSI Energy, Inc., and the C incinnati Gas & Electric Company, v iolation of the N ew Source Rev iew prov isions of the Cl ean Air Actas found by the J ury on May 22, 2008, f or the followin g projects: (1) the front wall radiant superheater replacement pr oject at Wabash River, Indiana, unit 2 fro m June 1989 to July 1989; ( 2 ) the high temperature finis hing superhea ter tubes and upper reheater Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 54 of 5855 tubing assemblies replacement p roject at W abash River, Indiana, unit 2 from May 1992 to September 1992; (3) the finis hing, intermediate, and radiant supe rheater tubes an d upper reheat tube bundles rep lacement projec t at Wabash River, Indian a, unit 3 from June 1989 to October 1989; and (4) the boil er pass and heat recovery actions replacement project at W abash River, Indiana, uni t 5 from Fe bruary 199 0 to May 199 0; def endan ts, Ciner gy Corp., PSI Ener gy, Inc. , and the Cinci nnati Gas & El ectric Company , SHALL : 1. Shutdown Wabash River units 2, 3, and 5, no later than September 30, 2009; 2. Run Wabash River units 2, 3, and 5, at a rate that doe s not excee d the Rosen baseli ne emissionsuntil the ti me said units ar e shut down; unless defendants can show theCourt good cause for running those units above said baseline; and 3. Surrender, permanently, SO 2 emission all owances in an amoun t approximately equal to the amount of SO 2 emissions from W abash River u nits 2, 3, a nd 5, from the period beginning on May 22, 2008, through shut down of those uni ts on September 30, 2009. As the remedy for defen dants’, Cinergy Corp., PSI En ergy, I nc., and the Cincinnat i Gas & Electric Company, v iolation of the Ohi o State Implementatio n Plan partic ulate matt er emissionslimits at B eckjord unit s 1 and 2 on October 12, 1999; October 21-22, 1999; May 4, 2 000; an d May 26, 200 0; as concluded by the Cour t by Order dated September 28, 2007, defendants, Cinerg y Corp., PSI Energy , Inc., and t he Cincinnati Gas & Electric Company, SHALL : 1. Pay to pl aint iff s, the U nite d Sta tes of Ame rica, an d pl aint iffint e rvenors, the States of New York, N ew Jersey and Connecticut , and the Hoosier Environmental Council and t he Ohio Envi ronmental Council , a penalty in the total amount of $687,500. 00; Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 55 of 5856 2. Install a particulate matter continuou s emissionsmonitor on Beckjord units 1 and 2 as soon as practi cal. Said par ticulate matter continuous emissionsm onit orsshal l beused for compl iance purpose s onl y i f a thirty- day aver aging ti me is used. There bein g no ju st rea son f or de lay, the Court shal l enter parti al final judg menton plaintiff’s, the United States of Am erica, and plaintiff -intervenors’, the States of New York, New Jersey and Connecticut, and the Hoosier En vironmental Council and t he Ohio Environmental Council, claims th at def endan ts, Ciner gy Corp., PSI Energy , Inc., and the Cincinnati Gas & Electric Company, violated the N e w Source Review provisi ons of the Clean Air Act with respect to the projects on W abash River unit 2, 3, and 5, as finally resolved herein. IT IS SO ORDER ED this 29 th day of May , 2009.

________________________________ LARRY J. McKINNEY , JUDGE United States District Court Southern Dist rict of Indiana

Distribut ion attached. ________________________________ LARRY J. McKINNEY, JUDGE United States District Court Southern District of Indiana Case 1:99-cv-01693-LJM-JMS Document 1746 Filed 05/29/2009 Page 56 of 5857 Distributed to: Scott R . Alex ander T AFT S TETTI NIUS & H OLLISTE R LLP salexand er@taftlaw.com Kevi n P. A uerbac her S TATE OF N EW J ERSEY D EPT

. OF L AW & P UBLIC S AFETY auerbkev@law .dol.lps.state.nj.us Thomas Andrew Benson U.S. D EPARTMENT OF J USTICE , E NVIRONMENTAL E NFORCEMENT thomas.benson@usd oj.gov Meghan Del aney Berroy a S IDLEY A USTIN LLP mberroya@sid ley.com Samuel B. Boxerman S IDLEY A USTIN LLP sboxerman@si dley.com Phillip Brooks U.S. D EPARTMENT OF J USTICE phillip .brooks@usdoj.gov Jayna M orse Caciopp o T AFT S TETTI NIUS & H OLLISTE R LLP jcacioppo@taftlaw .com Rob ert R . Cl ark T AFT S TETTI NIUS & H OLLISTE R LLP rclark@taftlaw.com Larry Ma rtin Corcoran U.S. D EPARTMENT OF J USTICE , E NVIRONMENTAL & N ATURAL R ESOURCES D IV

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